YUM! BRANDS INC. $68 - New York symbol YUM

YUM! BRANDS INC. $68 (New York symbol YUM; Aggressive Growth Portfolio; Consumer sector; Shares outstanding: 451.8 million; Market cap: $30.7 billion; Price-to-sales ratio: 2.3; Dividend yield: 2.0%; TSINetwork Rating: Above Average; www.yum.com) has 36,087 fast-food restaurants in over 110 countries. Its main banners include KFC (fried chicken), Pizza Hut and Taco Bell (Mexican food).

In the quarter ended September 8, 2012, Yum’s earnings rose 23.0%, to $471 million from $383 million a year earlier. The company spent $414 million on share buybacks in the latest quarter. Due to fewer shares outstanding, earnings per share rose 25.0%, to $1.00 from $0.80. Without unusual items, such as losses on sales of Pizza Hut restaurants in the U.K. to franchisees, earnings per share would have risen 19.3%, to $0.99 from $0.83. Sales rose 9.0%, to $3.6 billion from $3.3 billion a year earlier.

However, Yum expects its same-store sales in China to fall 4% in the fourth quarter; China accounts for 50% of its sales and 45% of its earnings.

Even so, Yum still expects to earn $3.24 a share in 2012, which is a 13% gain over 2011. The stock trades at 21.0 times the new estimate. That’s still reasonable in light of the company’s long-term growth prospects: Yum expects its earnings to rise at least 10% in 2013. The $1.34 dividend yields 2.0%.

Yum Brands is a buy.

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