Stock Watch
Yum Brands: Chinese Takeout
Catering to China is proving a profitable strategy for the parent of Taco Bell, Pizza Hut and KFC.
July 15, 2004
If you go to a KFC in China, don't be disappointed when Teriyaki chicken and white rice turn up on your tray in place of extra crispy or original recipe.
Fast-food franchiser Yum Brands' (YUM) 1,100 restaurants in China are mostly Kentucky Fried Chickens with a distinctively Eastern slant.
Catering to the Chinese so far has proved a profitable strategy for the umbrella company of Taco Bell, Pizza Hut and KFC. On Tuesday, the company announced second-quarter earnings that jumped 45% from the same period a year ago and smoked Wall Street expectations by three cents per share.
Yum credits its massive international expansion program for its fat earnings and says China and the U.K. are its most profitable markets. Pizza in Mexico is popular, too. Yum's international division has opened 537 new restaurants so far this year. And focusing booming business abroad helps Yum offset higher food and labor costs in the U.S.
At $38, shares of Yum trade at less than 15 times the 2005 consensus earnings estimate of $2.57 per share and 1.3 times sales. The company also pays its shareholders a delicious 40 cents per share annual dividend.
--Elizabeth Frengel
