Goldman Sachs Shocked by Magnitude of Yum! Brands' (YUM) China Decline, Rating Under Review

February 5, 2013 10:08 AM EST Send to a Friend
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Price: $69.88 +0.91%

Rating Summary:
    13 Buy, 11 Hold, 0 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 24 | Down: 28 | New: 14
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Analysts at Goldman Sachs weighed in on Yum! Brands (NYSE: YUM) following in-line Q4 results but an indication that China SSS were likely to remain in the -25% range in 1Q13 due to the negative headlines surrounding the quality of its chicken supply.

Goldman said they were surprised by the magnitude of the China SSS decline as the -25% in 1Q13 suggests no improvement from the last two weeks of December, which was the peak of negative publicity. The firm said "we are not aware of any historical
analogues where a scaled concept declined by this magnitude." They said given this it is hard to gauge what a recovery may look like.

Gomdna expects the stock to trade in the $56 to $70 per share range if YUM resumes its prior trajectory in 2014 and hits $3.50 in EPS next year. An above-trend EPS growth
year in 2014 from easy compares equates to $3.75 EPS and implies $60-75 per share, the firm said. If the company's base case assumption of positive China SSS by 4Q13 proves aggressive, "this may be just the beginning of a continued downward EPS revision cycle," the firm said.

Goldman has Buy rating and price target of $77.00 on Yum! Brands but said its price target and rating are under review pending the conference call.

For an analyst ratings summary and ratings history on Yum! Brands click here. For more ratings news on Yum! Brands click here.

Shares of Yum! Brands closed at $63.94 yesterday.


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