Yum! Earnings: Part Yum, Part Yuck (YUM)

Yum! Brands Inc. (NYSE: YUM) posted earnings of $0.46 EPS on revenue of $3.38 billion. Analysts had expected results of $0.45 EPS on $3.38 billion in revenue, according to Thomson Reuters (First Call). Yum! earnings were not as clean as they have been, but the guidance is far from a disaster.

The company’s earnings growth in 2008 was 14% and it is planning for "at least10% growth in EPS" in 2009. Nonetheless, the company does see the U.S. consumer getting squeezed financially and said that sales growth ismore difficult to achieve than in recent times.  The company notes thatthe pressure is particularly evident in the higher ticket customeritems. 

The company is saying its 2009 growth will be back-end loaded.  Thetranslation is that it will be soft upfront and stronger throughoutthe year’s second half.  That also means you have to trust the companyto execute on all of its initiatives. 

The company also said that it sees negative currency trends continuing in 2009 despite international growth.

Guidance is for a decline in Q1 and "at least 10% EPS growth" to$2.10 EPS for the year. So it is light at the start of the yearin guidance, with the hopes of making it up.  Analysts are looking for$0.43 EPS for the current quarter and $2.08 EPS for the year. 

Yum! repurchased 4 million shares at an average purchase price of$26.55 in Q4 for a total of $116 million; and for the year itrepurchased 47 million shares at an average of $34.50.  In 2008, itreduced average shares outstanding by 9%, and by more than 20%via $5 billion in share buybacks over the last four years.

The company is holdingup better than many peers in casual dining.  Shares closed up 2.5% at$28.27 today, and the stock is barely lower inafter-hours trading.

Jon C. Ogg
February 3, 2009