NEW YORK (AP) -- Shares of Yum Brands Inc. rose in premarket trading Tuesday after the company announced a smaller-than-expected drop in its sales in China for the months of January and February following a food scare over its chicken suppliers.
The owner of KFC, Pizza Hut and Taco Bell said late Monday that its sales at China stores open at least a year dropped 20 percent for that two-month period, less than the 25 percent decrease it had projected.
Yum's China sales rose 2 percent overall for the month of February, helped by the timing of Chinese New Year. But the timing of the holiday hurt the company's January sales, ultimately having a neutral effect.
Jefferies analyst Andy Barish said he'd expected a drop of 10 percent for February and a 25 percent decrease for the two-month period overall. He backed his "Hold" rating, but boosted his price target by $6 to $60.
"Even with minimal visibility and potential for down earnings per share in 2013, the stock remains resilient, indicating investors think the slowdown is transitory and double-digit growth can return in 2014," Barish wrote in a note to investors.
"While this kind of rapid turnaround is possible, we think this upside is reflected in the stock."
With 5,300 restaurants in the country, Louisville, Ky.-based Yum is the biggest Western fast-food operator in China. KFC accounts for most the locations.
The company has been reeling from a December TV report in China that said its suppliers were giving chickens unapproved levels of antibiotics. But Yum has since launched a campaign to rebuild its brand, announcing that it eliminated more than 1,000 small producers from its supplier network and that it would strengthen oversight over farmers.
To keep investors updated on its efforts, Yum is reporting monthly sales figures for China until the business recovers.
In trading two hours before the market opening, Yum shares rose $4.25, or 6.3 percent, to $72.09.