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Cramer: Yum disappointed the street, but I'm buying today

Tuesday, 13 Aug 2013 | 10:11 AM ET
Cramer: I'm buying this stock today
Tuesday, 13 Aug 2013 | 9:07 AM ET
After reporting earnings that disappointed the street, Yum Brands is a stock that Cramer is buying for his charitable trust Tuesday.

Wall Street expectations jumped the gun on Yum Brands, but as share prices pulled back on disappointing July sales in China, now's the time to buy the stock, CNBC's Jim Cramer said Tuesday.

"My charitable trust is buying today. Why? Because I think that the expectations have gotten too far ahead," Cramer said on "Squawk on the Street" Yum CEO David "Novak has never said that this was going to be solved in the second quarter. He never said it was going to be solved in the third quarter. He said it's going to take a year. The street got ahead of Novak, that's a mistake."

(Read more: Yum feeling the heat in China as July sales tumble)

Cramer pointed out that Merrill Lynch predicted last week that Yum's problems in China were over, and "that set the expectation that drove the stock up to $74."

After Yum opened for trading, Cramer said that "If you didn't have that last minute expectation gain, it wouldn't even be down."

(Check here to see where Yum! shares are trading now)

Despite his optimism and opinion that the company is a "buy" right now, Cramer said that he was unimpressed by the numbers in the company's earnings report.

On Monday, Yum reported a much steeper-than-expected 13 percent drop in July sales at established restaurants in China as the company strives to bounce back from a food safety scare and bird flu outbreak in its top market.

"I didn't like the numbers. It's a setback. I was looking for China same-store sales to ... fall only a fraction of what they did," he said.

(Related: Yum will rebound by year-end: Pro)

Yum operates or licenses restaurants including KFC, Taco Bel and Pizza Hut.

Cramer said weakness in Pizza Hut, which was unaffected by the bird flu scare, bothered him: "It was Pizza Hut that shocked me. I thought that Pizza Hut should have been much better."

"I think that the projections at the last minute, the consensus got too high," Cramer said. "I think it's temporary. I want to go back to what Novak promised. He promised that by Q4, the drama would draw to a close. We're not in Q4 yet."

Jim Cramer's charitable trust owns shares of Yum! Brands.

— By CNBC's Paul Toscano. Follow him on Twitter and get the latest stories from "Squawk on the Street" @ToscanoPaul

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