Bird Flu Outbreak Threatens Yum! Brands

Today’s downgrade is based on projected adverse reaction to KFC as a result of the recent outbreak of the H7N9 bird flu virus in China. If Chinese consumers stay away from chicken, Yum! Brands, which has invested heavily in its Chinese operations, could take a second serious hit to revenues.

UBS has maintained its price target of $73 on the company’s stock, and Wells Fargo analysts have warned of a negative impact of as much as 10% on the company’s same-store sales for the month of March.

The Chinese government has told its citizens to avoid contact with live poultry, and the World Health Organization has issued a warning not to purchase fresh chickens at stalls where the animals are butchered on the spot. The warnings are very likely to cause enough concern among consumers to change their fast-food eating habits as well.

Yum! Brands shares are trading nearly flat at $66.91, after opening down about 1.2%. The stock’s 52-week range is $59.68 to $74.75.