Yum! Brands (YUM) Stock Soaring as China Sales Increase

Yum! Brands (YUM) stock is rising along with the company's same store sale sin China for the month of October.
By Amanda Schiavo ,

NEW YORK (TheStreet) -- Shares of Yum! Brands (YUM) - Get Report are gaining by 4.55% to $70.15 in pre-market trading on Friday morning, following last night's announcement that the fast food chain operator's same store sales for its troubled China division grew last month.

The parent company of the Pizza Hut, Taco Bell and KFC chains reported a 5% increase in sales for the China division in October, just below the 6% rise the company posted for September, the Wall Street Journal reported.

Yum! Brands' China division was once the focusing point of the company's expansion plans, the Journal noted. However, last month the company announced plans to spin off the unit amid a series of struggles.

The spinoff is expected to be completed by the end of 2016.

Yum! Brands is expecting to report flat to a rise of 4% in same store sales in China for the current quarter. However, the company did note that "same store sales remain difficult to forecast in China," the Journal added.

Separately, TheStreet Ratings team rates YUM BRANDS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

We rate YUM BRANDS INC (YUM) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, good cash flow from operations, growth in earnings per share and notable return on equity. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • YUM's revenue growth has slightly outpaced the industry average of 1.5%. Since the same quarter one year prior, revenues slightly increased by 2.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Hotels, Restaurants & Leisure industry average. The net income increased by 4.2% when compared to the same quarter one year prior, going from $404.00 million to $421.00 million.
  • Net operating cash flow has significantly increased by 64.77% to $870.00 million when compared to the same quarter last year. In addition, YUM BRANDS INC has also vastly surpassed the industry average cash flow growth rate of 1.72%.
  • YUM BRANDS INC has improved earnings per share by 6.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, YUM BRANDS INC reported lower earnings of $2.29 versus $2.36 in the prior year. This year, the market expects an improvement in earnings ($3.15 versus $2.29).
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, YUM BRANDS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: YUM

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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