Yum Brands Earnings Preview

Yum Brands

is reporting earnings after the close today, with consensus estimates of 89 cents a share EPS on revenues of $3.48 billion. In the second quarter, Yum Brands reported EPS of 73 cents, missing consensus estimates of 74 cents. Morgan Stanley and BOAML are both below consensus on YUM earnings, with their comments below. John Glass-Morgan Stanley-81 cents Our 3Q14 estimate of 81c (-4% Y/Y) is 8c below consensus. 3Q results likely to reflect the sharp decline in China sales. Key questions include the magnitude of China margin deleverage--we think the Street is too optimistic-- and pace of sales recovery. Remain below consensus for '14 & '15 ests Joseph Buckley-86 cents Bank of America Merrill Lynch Yum release should be interesting. Yum preannounced that 3Q China (June/July/Aug) same store sales declined 13% versus a down 11% performance in 2013. This should lead to a weak earnings quarter and a lowering of 2014 guidance. Our EPS estimate for 3Q is $0.86, modestly lower than consensus of $0.89. Several other houses had comments; Bernstein: margin erosion will be focus of investor concern Barclays: may cut 1014 to 15% from prior view of 20% due to China concerns Jefferies: anything below 13% growth may drive shares lower Shares of YUM are trading lower by 1.75 percent at 70.13 in front of earnings