Yum! Brands, Inc. – Another earnings beat? Not so tasty.

Yum! Brands (YUM), known for its KFC, Pizza Hut and Taco Bell franchises, reported Q213 Adjusted EPS of $0.56 after the market close today, July 10, 2013.  That was reported as a 2 cent beat vs. analyst earnings expectations of $0.54.  As with Alcoa on Monday, YUM shares moved higher in after-hours trading on the news.

Is this a stock that should be trading 16% higher now at $73 than it was a year ago when it was $63 based on these metrics reported today?

Q213 Revenue $2.90 billion -9.4% vs. Q212 $3.20 billion

Q213 Operating Profit ex-franchising $358 million -22.2% vs. Q212 $460 million

Q213 EBIT Margin 12.5% -13.8% vs. Q212 14.5%

Decidedly no, YUM shares should be trading below and not above year ago levels.  Further YUM relied on earnings gimmickry by accruing less for taxes, at a 22.1% tax rate vs. 23.9% last year, to slightly beat their estimate this quarter.  As mentioned in my blog yesterday ‘View quarterly earnings in the context of consensus estimate trends’ (https://christinemederaccountingadvisory.wordpress.com/wp-admin/post.php?post=94&action=edit) knowing the trend in analyst earnings estimates is critically important.  As seen below, Q213 YUM estimates are the lowest they have been in four years at $0.54 down from $0.80 late last year yet YUM shares are twice as high in the low $70’s now as they were at $35 back in 2009.


I view YUM shares as a risky investment at current prices.  If you find these equity insights beneficial and would like assistance with your accounting and investment activities, please contact me, Christine Meder at Christine Meder’s Accounting Advisory Services.  My email is mederchristine1526@gmail.com and you can tweet me at @christinemeder1.  I’m offering a free 30 minute consultation during the month of July.  #unrbrand


About Christine Meder
Leveraging my insights and professional experience of 25 years in the accounting profession, I and my firm Christine Meder's Accounting Advisory Services provide our high net worth clients expert advice on their business activities and investments. In addition to performing traditional accounting functions in a confidential manner, I pride myself in giving clients a competitive edge whether it be in running their businesses or managing their investment portfolio. My studies leading up to completion of the EMBA program at the University of Nevada, Reno this August provide me with latest skills and techniques utilized across a broad spectrum of business functions. This breadth of education is complemented with experience as an accountant in the construction, mining, real estate and technology fields during my career. If you are looking for a trusted adviser or consultant in addition to someone you can rely on to properly keep your books, please contact me.

2 Responses to Yum! Brands, Inc. – Another earnings beat? Not so tasty.

  1. The analysts will never win on “The Price is Right.”

    • Agreed. As I point out, equity investors should focus on the trend in earning estimate revisions rather than emphasize a reported beat or miss when the focus is greatest on an earnings release date. We’re not investors on just 4 days of a year, but throughout the year. It’s not hard being smarter than an analyst. By the way, I really like your planoaccountant blog. Well done!

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