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Yum Brands Celebrates The Year of the Horse

By: Nicole Urken | 02/04/14 - 05:12 PM EST

Stocks in this article: YUMMCD

NEW YORK (TheStreet) -Investors are cheering an up day on Wall Street, after a volatile January and start to February, on the heel of disappointing macro data, including emerging market worries.

The just-celebrated Chinese new year is bringing with it volatility. And, after all, the Year of the Horse is supposed to bring conflicts and disasters, according to Hong Kong's practitioners of the ancient art of feng shui. But, they say, the market should turn higher nonetheless.

Of course, we don't analyze stocks based off of the lunar new year. And key for the markets will be Friday's employment report in the US. But we are looking at incremental data from individual companies.

One positive China data point that helped the market to some degree today? The one from Yum Brands (YUM)-the parent company of KFC, Pizza Hut, and Taco Bell-where china represents 60% of profits. We already knew that comparable sales in the region would fall by 4%, but key was the 40 bps restaurant margin improvement to 14.3%. Unlike last spring, KFC China is not seeing any national sales impact from the bird flu in China. And, pizza hut comps, while a less important part of that region, also have recovered to positive territory after disappointing in December. And there are many sources of upside that remain, including leveraging investments in the distribution system, a shift to higher margin cities and potential for Little Sheep 2.0. Think this is trivial? YUM is the largest quick serve restaurant company with almost 40,000 units in more than 125 countries.

Yum Brands remains well positioned, and while it ran almost 9% today to $72, it is still off its recent highs of $78... and it has more catalysts than McDonald's (MCD).

--Written by Nicole Urken in New York.

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