YUM! Brands (YUM) Q4 Solid but Stock Hit as China Poultry Scare Fears Materialize

February 4, 2013 5:42 PM EST
Yum! Brands, Inc. (NYSE: YUM) stock was hit late on Monday after it reported Q4 results. Recently investors worried contaminated chicken in China would result in a dramatic decrease in Q4 comps. Sure enough, comps sank and guidance was noticeably week.

Revenue in Q4 totaled $4.15 billion, slightly ahead of estimates of $4.12 billion. EPS came in at 83 cents, topping expectations by a penny. U.S. and YRI comps grew 3 percent, but as feared China same-store sales plunged by 6 percent.

China Division KFC same-store sales turned sharply negative during the last two weeks of December as a result of adverse publicity from the poultry supply situation, admitted YUM. The impact 2013 EPS is expected to be significant.

"Given current uncertainties related to KFC sales in China, it is difficult to confidently forecast our overall financial performance," said the company. "We have made the assumption that KFC China same-store sales will improve as the year progresses and will be positive in the fourth quarter. With these assumptions, we estimate a mid-single digit EPS decline in 2013 versus prior year, excluding Special Items. This includes an expectation for a significant decline in EPS performance in the first half of the year followed by EPS growth in the second half."

"We expect that the underlying performance of our China business will remain relatively unchanged for the balance of the first quarter, with a same-store sales decline of approximately 25% for January and February combined (China’s first quarter)," warned the company.

Shares of Yum! Brands traded lower by 5 percent to $60.70 after-hours Monday.

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