The company behind KFC, Pizza Hut and Taco Bell was screaming in pain on Wednesday, when Yum Brands plummeted 18 percent following a large earnings miss. However. considering the damage done, Jim Cramer was surprised that the stock only dropped that much.
"Given the ridiculous timeline of information coming out of the company, I'm actually surprised its stock wasn't down even more; that's how bad the story and the dissemination of the woeful news truly was," the "Mad Money" host said.
While Yum is a large international company, its driver has mainly stemmed from China. For years, investors have ridden the wave of growth in the People's Republic, simply by buying shares of Yum.
Yum's numbers, released Tuesday night, showed a dramatic deceleration in its business, with Chinese same-store sales up just 2 percent versus the 10 percent that Wall Street expected. Investors were further disappointed when Yum told an even more negative story on its conference call Wednesday morning.
Yum revealed that not only was KFC terrible, but Pizza Hut had hit a wall and has descended alarmingly fast. Analysts then began to not only doubt the ability of management to forecast, but to also execute.
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So with one big blast, Yum managed to disenchant investors when it took away earnings momentum and any hope for a turnaround in China. The only good thing that Cramer heard on the conference call was a recognition that most of the damage came from competition, and not a specific Chinese slowdown.
"In short, Yum Brands has crushed the dreams of both the activists and the momentum players, leaving everyone holding empty boxes of pizza and KFC," Cramer said. (Tweet this)
Cramer now considers this stock to be radioactive, for the foreseeable and maybe unforeseeable future.