NEW YORK (TheStreet) -- Shares of YUM! Brands Inc. (YUM) are falling by 3.67% to $72.46 at the start of trading on Wednesday morning, as the stock continues to slump following yesterday's announcement the KFC, Taco Bell, and Pizza Hut owner, operator, and franchiser has lowered its earnings growth expectations.
The company is expecting mid-single digit full year 2014 earnings growth, versus the 20% growth the company forecast in July, Bloomberg reports.
The fast food company is still recuperating from a 2012 supply chain investigation in China, and was hit by another food scare scandal in the country this past July. The vendor OSI Group LLC was investigated by the government for allegedly changing the expiration dates on meat, Bloomberg added.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
For 2015 YUM! is expecting at least a 10% earnings per share growth, while analysts have forecast a 17% increase in EPS for the year.
Separately, TheStreet Ratings team rates YUM BRANDS INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate YUM BRANDS INC (YUM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, impressive record of earnings per share growth, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 165.8% when compared to the same quarter one year prior, rising from $152.00 million to $404.00 million.
- YUM BRANDS INC reported significant earnings per share improvement 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 $2.36 versus $3.37 in the prior year. This year, the market expects an improvement in earnings ($3.23 versus $2.36).
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to other companies in the Hotels, Restaurants & Leisure industry and the overall market on the basis of return on equity, YUM BRANDS INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.4%. Since the same quarter one year prior, revenues slightly dropped by 3.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- In its most recent trading session, YUM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- You can view the full analysis from the report here: YUM Ratings Report