Yum! Preview: How To Profit From Results
As the owner of Taco Bell, KFC and Pizza Hut, what must you know about fast food giant Yum Brands into earnings?
We've got alll the angles covered; from fundamentals and technicals to action in the options world here's what you must know!
Investors look at the health of fast food chains such as this one for insights into the health of the consumer, both domestically and overseas - in Yum's case we're talking China. A strong sales rebound would be a powerful sign that consumers are able to spend more on dining out -- even if it's just on value menu items.
If you're trading Yum stock specifically, Citi analyst Greg Badishkanian thinks business in China will have the most impact on share price. “In China, same store sales were down 3% in Q4,” he says.
”If we see a major improvement I expect to see upside movement in this stock; if we see deterioration conversely I expect to see stock deterioration. “
Brian Kelly, Kanundrum Capital is largely bearish.
“The stock took off to $41 like a scalded dog,” he says.
But looking at the 2 month chart, “ we can see there were 5 waves up -- up to the target range of $41 to $41.10.
What’s the mean?
”I'd be taking profits and I’d get back in around $36 or $36.30. That should be support.”
Brian Stutland, Stutland Equities sees investors protecting themselves for disappointing earnings.
“An options trader sold 430,000 shares of stock at the same time he (or she) bought some April calls,” Stutland explains, interpreting the action as as a bet this investor “still wants to be able to participate on the up side. But he’s also defining his risk and getting that defined risk exposure in case Yum! earnings come off worse than expected.”
What’s the trade?
I’m bullish on Yum, says Guy Adami. Historically the stock sells off after earnings so I’m a buyer of the dip.
I think the valuation is attractive but it’s not pound-the-table cheap like it was, adds Karen Finerman.
If you’re looking to play the space I’d play McDonald’s instead, counsels Tim Seymour.
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Trader disclosure: On April 13, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Najarian Owns (CSX) call spread; Najarian Owns (LVS) call spread; Najarian Owns (JPM) call spread; Najarian Owns (BAC) Calls; Najarian Owns (C) Calls; Najarian Owns (CSX) Call spread; Najarian Owns (LVS) Call spread; Najarian Owns (JPM) Calls; Najarian Owns (PCX); Najarian Owns (TXN) Calls; Najarian Owns (VLO) Calls; Najarian Owns (YUM) Call Spread; Adami Owns (INTC), (GS), (AGU), (MSFT), (NUE), (BTU), (C) ; Finerman's Firm Is Short (IJR), (MDY), (IWM), (IYR); Finerman's Firm Owns S&P Puts; Finerman's Firm Owns (JPM); Finerman Own (JPM) ; Finerman Owns (BAC); Finerman's Firm Owns (BAC); Finerman's Firm Owns (BAC) Preferred; Finerman's Firm Owns (TGT); Finerman's Firm Owns (WFC) Preferred; Finerman Owns (WFC) Preferred; Finerman Owns (YUM); Seymour Owns (CHL), (DRYS), (GE), (BAC), (EEM), (F), (INTC), (LVS), (SBUX); Seymour's Firm Owns (POT)
For Patty Edwards
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Edwards Owns (GS) for Clients
For Citi analyst Donald Fandetti
Citi Owns (AXP)
Citi Owns (COF)
Citi Has Provided Baking Services To (AXP)
Citi Has Provided Baking Services To (MA)
Citi Has Provided Baking Services To (COF)
Citi Expects To Receive Compensation from (AXP), (V), (MA)
Citi Has Acted As Manager or Co-Manager Of Offering of (AXP), (COF)
Citi has Managed a Securities Offering of (YUM)
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(YUM) is an investment banking client of Citi
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