Ahead of the Bell: Yum's China challenges ease
Analyst lifts Yum price target, partly on continued improvement of performance in China
NEW YORK (AP) -- An analyst raised her price target for Yum Brands on Tuesday, partly on continued improvement of the restaurant operator's performance in China.
Yum Brands Inc., which owns KFC, Pizza Hut and Taco Bell, has had a difficult time since late December when a Chinese TV report said some KFC suppliers were giving chickens unapproved levels of antibiotics. It has also dealt with a bird flu scare in the region.
China is an important country for Yum, which has benefited greatly from China's rapid economic expansion in recent years. The company, based in Louisville, Ky., is the biggest Western fast-food operator in China with 5,300 locations, most of them KFC restaurants. In 2012, Yum raked in more than half its total sales from China.
There have been signs that the Chinese sales declines are easing. Last month Yum reported that a key sales figure for China fell 19 percent in May. While a decline, it was better than the 29 percent drop in the metric in April.
On Tuesday Rachael Rothman of Susquehanna Financial Group said things appear to be looking better for Yum.
"Investors have been willing to look through the valley created by the chicken supplier issue in late 2012, and the subsequent avian flu outbreak which peaked in mid-April, and focus instead on the more 'normalized' trends in 2014," she wrote in a note to clients.
Rothman said that as long as Yum shows its revenue at stores open at least a year is improving, its stock will like trade a bit higher. The analyst increased the company's price target to $73 from $67 and kept a "Neutral" rating. Yum's shares were unchanged at $72.49 in premarket trading.
A representative for Yum did not immediately respond to a telephone call seeking comment.
