* Yum Q4 EPS excluding items 46 cts vs Wall St view 45 cts
* Sees EPS ex-items declining in current quarter
* China same-store sales rise slows to 1 pct
* Shares fall 2 pct (Adds analyst comments; updates stock move)
By Lisa Baertlein
LOS ANGELES, Feb 3 (Reuters) - Yum Brands Inc (YUM.N), the parent of Taco Bell, Pizza Hut and KFC, posted a quarterly profit on Tuesday that topped Wall Street's target, but its shares fell 2 percent on slowing China growth.
Yum generates 60 percent of its operating profit from China and other overseas businesses. Those markets had sheltered Yum and companies such as rival McDonald's Corp (MCD.N) from the U.S. recession for most of 2008, but have recently shown weakness in now a global slowdown.
"Probably it's the (same-store sales comparison) in China that's spooking people ... I think analysts had expected probably a little higher number," said Edward Jones analyst Jack Russo. "You had to expect some slowing since there is economic slowing going on in that market."
Yum said fourth-quarter same-store sales in China were up just 1 percent compared with year-earlier growth of 17 percent. Same-store sales were up 5 percent for Yum's international unit and up 2 percent for the United States.
In the third quarter, China same-store sales were up 5 percent, Yum International was 4 percent higher and the U.S. was rose 3 percent.
As China slows, analysts said Yum will be more reliant on growth from its U.S. business for the first time in years.
The company's domestic Taco Bell restaurants appear to be on track and its Pizza Hut chain is giving rivals Domino's Pizza Inc (DPZ.N) and Papa John's International Inc (PZZA.O) a run for their money, but KFC has struggled for years and now plans to reshape the brand around grilled chicken.
"The United States is doing better, but they've still got some work ahead of them ... The thing I'm concerned about is KFC dragging," said Stifel Nicolaus analyst Steve West.
West thinks it will difficult to change diners' perceptions of KFC, which for decades has sold high-calorie fried chicken.
The company is "banking on a U.S. turnaround like they did in 2008 -- which didn't happen. I have more confidence it will happen in '09 than I did in '08," said West.
Yum said fourth-quarter net income fell to $204 million, or 43 cents per share, compared with net income of $231 million, or 44 cents per share, a year earlier.
Profit excluding special items was 46 cents per share, topping analysts' average forecast of earnings of 45 cents, according to Reuters Estimates.
Total revenue rose to $3.38 billion from $3.26 billion.
The company expects earnings, excluding special items to decline in the first quarter of 2009.
It repeated its forecast for per-share earnings growth of at least 10 percent in 2009 and said it sees full-year earnings of $2.10 per share, excluding items.
That is 2 cents above analysts' average forecast of $2.08 for 2009.
Executives for Louisville, Kentucky-based Yum are scheduled to discuss results with analysts during a conference call on Wednesday.
Yum shares fell to $27.70 in extended trading from their close of $28.27 on the New York Stock Exchange. (Reporting by Lisa Baertlein; Editing by Gary Hill and Andre Grenon)