Yum Brands expects 2012 profit growth

A sign shows Yum Brands Inc's support center at its corporate headquarters in Louisville, Kentucky January 18, 2011.

(Reuters) - Yum Brands Inc (YUM.N), the parent of the KFC, Taco Bell and Pizza Hut fast-food chains, raised its 2011 profit forecast and said it expects earnings per share to grow at least 10 percent in 2012, led by continued sales and profit growth in China.

Yum has nearly 4,200 restaurants in China, its top market for profit and revenue, mostly KFCs.

Yum said it expects system sales, which include all restaurants regardless of ownership, to be up at least 13 percent in China in 2012 and for sales at restaurants open at least a year to rise at least 5 percent.

Yum raised its 2011 earnings per share forecast to $2.85, excluding one-time items, meaning growth of at least 13 percent, despite what Chief Executive David Novak said were "disappointing U.S. results. That compares to its previous forecast of a 12 percent gain.

The forecast comes ahead of Yum's annual investor day on Wednesday and two months after the company sought to reassure Wall Street that business in China remained on track.

In its most recent quarter, Yum's overall sales at U.S. restaurants open at least one year fell 3 percent. But the company expects operating growth of 5 percent at its U.S. division in 2012 and Novak said in a statement there is "opportunity to dramatically improve U.S. performance."

Yum expects sales at established restaurants in Yum Restaurants International (YRI) to be up at least 2 percent to 3 percent in 2012. That division includes Yum's other non-U.S. markets such as France, India and Russia.

Yum expects about 600 new restaurants in China and 800 in its YRI division in 2012.

In a note to clients on Friday, Barclays Capital analyst Jeffrey Bernstein said "the China growth opportunity remains impressive, though we believe YUM fairly valued given short-term pressures."

The company is the No. 1 Western restaurant brand in China, with far more restaurants than rivals like McDonald's Corp (MCD.N) and Starbucks Corp (SBUX.O). As a result, the Louisville, Kentucky-based company is widely regarded as one of the biggest China plays for investors in the U.S. stock market.

Shares were up 1.1 percent to $56.85 in morning trading.

(Reporting by Phil Wahba in New York, Lisa Baertlein in Los Angeles, editing by Dave Zimmerman)