Here Is Why Yum! Brands Just "Beat" Earnings

On Monday it was Alcoa, now it is Yum! Brands' turn. The food company, best known for its KFC mystery meat, and over-reliance on a suddenly careening China just reported results which were mixed. Revenue of $2.904 billion was less than the expected $2.92 billion and was 8% lower than the $3.2 billion reported a year ago. Operating profit excluding refranchising gains and losses was $358MM, below expectations of $375MM, leading to a EBIT margin of 12.5% also substantially less than the 14.5% reported a year ago. In short, worldwide operating profit crashed 20% including a 63% drop in China. But thanks to various below the line adjustments, including a tax rate of 22.1% or lower compared to the 23.9% a year ago, the company's EPS of $0.56 beat expectations of $0.54.

So all is well right and the stock is justified to be up after hours, right?

Well, here is a chart showing the company's stock price (black line) and the change in the sellside consensus forecast for Q2 EPS (red line) which today was $0.54. Two months ago it was $0.75... when the stock was trading $10 lower.

Efficient markets indeed.


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