Jim Cramer -- Yum! Brands Will Likely Struggle in China on Earnings
Yum! Brands (YUM) - Get Report isn't partaking in Tuesday's record-breaking rally, with shares slightly in negative territory in afternoon trading. Perhaps investors are a bit timid ahead of Wednesday's earnings report.
The company likely won't report a good quarter from its Chinese operations, said TheStreet's Jim Cramer, co-manager of the Action Alerts PLUS portfolio, from the floor of the New York Stock Exchange.
Yum! Brands, which owns brands like KFC, Pizza Hut and Taco Bell, plans to split up the company, dividing its Chinese operations from the rest of its business. What had once been a huge growth booster, has acted as a drag in recent years, as its operations in China have run into a number of struggles.
"I am a huge believer in the breakup value," Cramer said. The non-Chinese business continues to be hampered by the Chinese business, he reasoned.
Eventually the Chinese business will rebound and Yum! will be on the right path. But for the time being, the non-Chinese business remains "very, very strong," as does management, and breaking the two up will create value, Cramer said. He reasoned that shares could be worth $100.
Analysts expect the company to earn 10 cents per share on $1.08 billion in revenue for the quarter.
At the time of publication, Cramer's Action Alerts PLUS had no position in companies mentioned.