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Yum! Brands’ EPS Are Expected to Grow in the Next 4 Quarters

Yum! Brands Could See Marginal Growth in 4Q15

(Continued from Prior Part)

Yum! Brands’ earnings revision

Over the last 12 months, Yum! Brands (YUM) reported earnings per share of $3.09, which fell 7% year-over-year. Much of this fall was due to the tumultuous performance in the company’s China division. With China recovering, let’s turn our attention to the next four quarters of growth expectations for earnings per share (or EPS).

EPS estimates

Wall Street analysts are estimating Yum! Brands to report EPS of $0.66 in 4Q15, which would mean flat growth from the same quarter in 2014. For the next four quarters, analysts are estimating that YUM will report EPS of $3.34 per share, which would mean growth of 10% year-over-year. These growth expectations may have already been baked in to the company’s share price.

On February 3, if Yum! Brands reports EPS growth that is different from expectations, its shares will likely move in tandem. Note that it’s not just the company beating or missing estimates that moves the stock. The management’s commentary on future growth and the company’s outlook will also play a role in how the market reacts.

Investors may also want to mitigate uncertainty by looking into a broader portfolio. The Consumer Discretionary Select Sector SPDR ETF (XLY) invests about 10% of its portfolio in the restaurant industry. This includes companies such as Yum! Brands, Starbucks (SBUX), Chipotle Mexican Grill (CMG), and McDonald’s (MCD).

Next, we’ll delve into Yum! Brands’ valuation multiples.

Continue to Next Part

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