UBS Says Yum Is Yummy

YUM-BRANDS
Buy -- Price 37.47 on April 14 by UBS Securities

We've trimmed our 1Q08 [estimated] and 2008E EPS by 1 cent each, due to unfavorable weather, ongoing commodity inflation [and] weakening consumer confidence (important for pizza segment) ... partly offset by greater-than-expected currency boost and solid momentum from Taco Bell versus easy "07 comps. Ongoing inflation and deteriorating consumer confidence could limit upside to our roughly 5% U.S. profit-growth estimate for "08... . We forecast 22% ... profit growth in China ... in 1Q (5% currency lift). We use 19.5 times our "09E EPS to get 43 target, implying 15% stock upside potential. Market cap: $22 billion.