U.S. News

Yum Brands Earnings Jump on Strength in Overseas Markets


Fast-food company Yum Brandsreported a 14% rise in quarterly net profit and raised its 2007 estimate on Tuesday as strength in China and other foreign markets offset weak results at Taco Bell in the United States.

Shares of the company rose almost 2% in extended trading Tuesday.

First-quarter net income was $194 million, or 70 cents a share, ahead of Wall Street analysts' average estimate of 64 cents a share, according to Reuters Estimates. In the same period last year, Yum earned $170 million, or 59 cents a share.

Revenue rose 7% to $2.22 billion, compared with an average analyst estimate of $2.15 billion, according to Reuters Estimates.

U.S. same-store sales, a key retail measure that tracks sales at restaurants open at least a year, declined 3%, led by an 11% drop at Taco Bell.

Sales at Taco Bell were hard-hit during the quarter due to fallout from an E. coli outbreak late last year and, more recently, a highly publicized rodent infestation at one of its New York City restaurants.

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.

In February, Yum said Taco Bell's same-store sales were expected to be up 1% to 2% for the year.

In Yum's China division, which includes Thailand and KFC Taiwan, sales rose 18% in local currency. Sales at its international division, which excludes China, grew 10%.

Yum raised its 2007 earnings forecast by 2 cents to at least $3.23 a share, matching analysts' average estimate, according to Reuters Estimates.

Yum shares trade at about 17.1 times analysts' average 2008 earnings estimate, compared with a multiple of 16.6 for rival McDonald'sand 18.9 for Burger King Holdings .

Yum, owner of the Taco Bell, KFC and Pizza Hut fast-food chain brands, operates more than 34,000 restaurants worldwide.