UPDATE 3-China drives Yum profit beat; raises '09 view

* Yum Q3 EPS excl items 70 cents vs Wall St view 58 cents

* Boosts 2009 EPS growth target to 12 pct from 10 pct

* Shares up 0.4 percent in extended trade (Adds details on results; updates stock activity)

By Lisa Baertlein

LOS ANGELES, Oct 6 (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."

Yum cut total costs and expenses by 5 percent to $2.31 billion during the third quarter, when its tax rate fell almost 8 percent to 19.9 percent.

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' average estimate of $2.13 per share, according to Thomson Reuters I/B/E/S.

Foreign currency translation reduced earnings by 2 cents per share, Yum said.

Shares rose in after-hours trade and then leveled off after Yum effectively played catch up with analysts' profit expectations for the full year.

The company also reported a big profit beat for the second quarter, but declined to raise its full-year earnings per share view at that time.

NET INCOME RISES

Third-quarter net income rose to $334 million, or 69 cents per share, for the quarter ended Sept. 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.

Same-store sales in Yum's closely watched China division were flat, in line with the company's previous full-year forecast for mainland China.

U.S. same-store sales fell 6 percent, including a 13 percent drop at Pizza Hut.

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.

Yum operates more than 36,000 restaurants in more than 110 countries and territories around the world. Executives said the company is on track to open more than 1,400 new international restaurants this year.

Shares in Yum rose 0.4 percent to $35 in extended trade, from their closing price of $34.86 on the New York Stock Exchange. (Reporting by Lisa Baertlein; Editing Bernard Orr)