Morgan Stanley On Yum! Brands, Inc.'s Upcoming Quarterly Results: All Eyes On China

John Glass of Morgan Stanley released a preview for Yum! Brands, Inc.'s YUM third quarter results which will be reported on October 7 after market close with a conference call to occur on October 8.

Glass expects Yum! Brands' third quarter results will reflect a sharp decline in sales within China and expects the company to earn $0.81 per share in the quarter. The analyst's projection falls $0.08 below the consensus estimate.

"We believe the difference primarily relates to China margin assumptions (17.5 percent versus consensus of 17.7 percent, with the key question of whether deft cost cutting mitigated some of the downside)," Glass wrote in a note to clients on Friday.

Other topics Glass is following includes the rate of sales recovery in the fourth quarter (the analyst already modeled a 6 percent decline) and whether management will provide any commentary or guidance for fiscal 2015.

Bottom line, investors may need to increase their risk expectations for Yum! Brands going forward. The analyst made no changes to his prior Equal-weight rating given "uncertainty surrounding shares" while establishing a $72 price target.