Tasty Quarter at Yum! Brands

The restaurant operator reports a 13% rise in earnings and bumps up guidance.
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Yum! Brands

(YUM) - Get Report

reported a 13% jump in third-quarter profits and raised its outlook for the year, thanks to international sales growth and the success of the company's multibrand store concept.

The world's No. 2 fast food operator behind


(MCD) - Get Report

reported a third-quarter net profit of $185 million, or 61 cents a share, up from $164 million, or 53 cents a share, logged in the same quarter last year. Analysts on Wall Street were expecting a profit of 60 cents a share.

For the full year, Yum raised its earnings forecast by 2 cents to $2.38 a share. In after-hours trading, its shares were adding a penny to the session's gain of 64 cents, or 1.5%, to $41.50.

Its revenue grew by 9.5% for the quarter to $2.2 billion from last year's $2 billion.

Yum, an offshoot of


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that now owns the Taco Bell, Pizza Hut and KFC restaurant chains, said its international business grew operating profits by 25%, or 24% before currency conversion, and overseas sales jumped 13%, or 8% before currency benefits. Domestically, sales at stores open for at least one year added 4%.

"The underlying strength of our China and international businesses coupled with continued strong same-store sales growth at Taco Bell and Pizza Hut is allowing us, once again, to exceed our annual target of at least 10% growth in EPS," David Novak, Yum's chairman and CEO, said in a statement.

The company has repeatedly stressed its sales potential in foreign markets, namely China, as its greatest potential for growth. Howard Penney, an analyst with Friedman, Billings, Ramsey & Co. who rates the stock a market performer, said foreign markets account for about 25% of the company's business and represents virtually all of its growth potential.

At $41.50, Penney felt the stock was trading at a premium. "I think a lot of the good news is priced in to the stock," he said.

Yum paid its first dividend during the quarter, 10 cents on Aug. 6. It also added 129 of its new "multibrand" restaurant concept, where, for instance, it could operate a Taco Bell, a Pizza Hut and a KFC all in the same restaurant. That brings its total multibrand restaurants to 383. The concept attempts to mold together the company's brands so they can operate more efficiently at lower costs with higher customer traffic.

"They're trying to take their core restaurant concepts and put them together in a way that allows them to compete with McDonalds, which focuses mostly on one concept," said Morningstar Analyst Carl Sibilski. "Multibranded restaurant is doing pretty well from what I've heard. They're getting the sales leverage on a real estate basis so they can start to compete with McDonald's."