China drives Yum profit beat; raises '09 view
LOS ANGELES (Reuters) - Yum Brands Inc (YUM.N), parent of the Taco Bell, Pizza Hut and KFC chains, posted a quarterly profit that blew past Wall Street's target, boosted by results from China, and raised its full-year profit forecast.
Overall operating profit was up 15 percent for the third quarter, driven by 32 percent growth in China and 18 percent growth in the United States, Yum said on Tuesday.
The fast-food company and other restaurant chains are benefiting from falling food prices and are wringing out expenses to deliver profits amid weak consumer demand.
"Clearly this quarter was made by lower food costs and lower general and administrative costs," Edward Jones analyst Jack Russo said. "Sales are tough to come by. These companies are just getting leaner and meaner."
The company now expects 2009 per-share earnings growth of 12 percent excluding items, driven by higher operating profit growth in China and a lower-than-expected tax rate -- up from its earlier call for growth of at least 10 percent.
The new growth forecast would result in 2009 earnings of $2.14 per share, which topped analysts' estimates of $2.13 per share, according to Thomson Reuters I/B/E/S.
Shares rose in after-hours trade and then leveled off after Yum effectively played catch up with analysts' profit expectations for the full year.
For the second quarter Yum also posted a big profit beat and did not raise its 2009 earnings per share view.
Third-quarter net income rose to $334 million, or 69 cents per share, for the quarter ended September 5, compared with net income of $282 million, or 58 cents per share, a year earlier.
Profit excluding special items was 70 cents per share, beating analysts call for a per-share profit of 58 cents.
Total revenue fell to $2.78 billion from $2.84 billion.
U.S. same-store sales fell 6 percent, including a 13 percent drop at Pizza Hut. Same-store sales in Yum's closely watched China division were flat.
Russo said the U.S. same-store sales result was worse than analysts' had expected and that Pizza Hut's performance was "absolutely horrific."
For 2010, Yum said it expects to deliver 10 percent earnings per share growth.
Louisville, Kentucky-based Yum, which competes with McDonald's (MCD.N) and Burger King BKC.N around the world, gets more than half of its operating profit from China and other overseas businesses. Investors expect most of Yum's future growth to come from those markets.
Shares in Yum were up 0.4 percent at $35 in extended trade. Shares had closed at $34.86 on the New York Stock Exchange.
(Reporting by Lisa Baertlein; Editing Bernard Orr)
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