Yum Brands Profit Increases, Fueled by Strong China Growth

Wednesday, 11 Jul 2007 | 5:22 PM ET
A KFC restaurant in Boston.
Steven Senne
A KFC restaurant in Boston.

Fast-food company Yum Brands posted higher fiscal second-quarter earnings that exceeded analysts' estimates, and the company raised its full-year earnings forecast.

Yum, which owns Pizza Hut, Taco Bell and KFC, reported second-quarter earnings of 39 cents a share compared with estimates of 36 cents. Yum also boosted its full year earnings per share growth rate estimate to 12% from 11%.

Revenue of $2.37 billion beat estimates by $100 million. The company reported strong same-store sales in China, which rose by 7%, while same-store sales were flat in the U.S. Global same-store sales rose 2%.

U.S. same-store sales, a key retail measure that tracks sales at restaurants open at least a year, were flat compared with last year.

Yum's U.S. business has struggled since more than 70 people fell sick late last year because of an E. coli outbreak linked to Taco Bell restaurants in the U.S. Northeast. Federal health officials said contaminated lettuce was the likely cause.

Yum said it expects to earn at least $1.63 a share for 2007, a penny better than its previous view but in line with analysts' average estimate.

The stock gained 5% on Wednesday after UBS analyst David Palmer upgraded his rating on the stock to "buy" from "neutral."

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