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China Will Keep Driving Yum Brands Inc. (NYSE: YUM) to New Highs
Yum! Brands Inc. (NYSE: YUM) today (Monday) reported fourth-quarter earnings that beat The Street, highlighting the impact a strong emerging market presence can have on soaring profits.
The quick-service restaurant business that owns KFC, Taco Bell and Pizza Hut chains saw quarterly profit rise 34% to 75 cents a share. Revenue for the quarter climbed 15% to $4.11 billion.
Yum's results beat Wall Street's expectations of 74 cents a share and a 13.1% revenue increase to $4.03 billion.
The yearly earnings per share increase of 14% marked the tenth consecutive year of EPS growth of 13% or more. Monday's earnings report shook off speculation that slowing Chinese growth could hurt Yum in 2011.
In fact, its outlook is as bright as ever.
Yum Brands Inc. (NYSE: YUM): Feeding China
Strong sales in China – Yum's major revenue driver – offset the struggling U.S. business. While full-year same-store sales fell 1% in the United States, same-store sales rose 19% in China.
China's quick-service restaurant industry is expected to grow around 15% this year – almost double China's gross domestic product (GDP) growth, which is only expected to jump 8.4%. The growth outlook means other restaurants will try to cut into Yum's market share and appeal to the country's growing middle class.
"KFC and McDonald's are growing outlet numbers, but so are domestic and foreign chains plus independents," Paul French, Mintel's chief China analyst, told Reuters. "The pie is bigger, but the number of players wanting and getting a slice of it are bigger too. A rising tide does not necessarily raise all boats."
Still, Yum's strong position in the region has readied it to beat competitors. Yum was one of the first U.S. quick-service restaurant businesses to successfully profit in China. It opened its first fried-chicken outlet in the region in 1987 and now has more than 4,200 total restaurants, compared to McDonald's Corp.'s (NYSE: MCD) 1,400 stores.
Yum! Brands expects China to lead the company to 10% total sales growth in 2012.
Emerging markets contributed to 50% of Yum's operating profit in 2011, and should account for a bigger portion this year. Yum! Brands plans to open another 600 new stores in China alone, after opening a record 656 in 2011.
Now Yum is diversifying its market presence. It announced Jan. 6 that shareholders of China's leading hot pot chain, Little Sheep Group Ltd., approved a takeover by Yum. Little Sheep operates about 3,000 restaurants in China, with annual revenue of $315 million.
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Insider Trading Ban: Congress Really Wants You to Like Them
In an attempt to end plunging approval ratings – and win favor in an election year – the Senate passed an insider trading ban yesterday (Thursday) preventing Congress members from profiting from non-public information.
The Senate passed the bill in a 96-3 vote. U.S. Rep. Eric Cantor, R-VA, said the House would consider the bill next week. U.S. President Barack Obama pledged to sign it immediately.
Congress members hope the new law will change growing American disgust with Congressional perks and partisanship, which has hammered approval ratings down to the teens.
"The numbers of people who have a favorable impression of this body are so low that we're down to close relatives and paid staff. And I'm not so sure about the paid staff," Sen. Joe Lieberman, I-CT, said earlier this week.
Insider Trading Ban Run Down
The insider trading ban prevents members of Congress, top aides, and administrative officials from using non-public information when trading. Any stock bought or sold must be disclosed in a public report online within 30 days.
Several last-minute amendments added to the insider trading ban include:
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Amazon.com Inc. (Nasdaq: AMZN): Growth Phase Pinches Profits, but Investors Should Ride it Out
Internet retailer Amazon.com Inc. (Nasdaq: AMZN) reported soaring revenue and limited profits today (Tuesday) – but investors shouldn't be discouraged by the low earnings as the company invests in future growth.
Amazon.com reported net income of $177 million, or 38 cents a share, compared to net income of $416 million, or 91 cents a share, for the same period the previous year – a 58% plunge. Revenue jumped to $17.4 billion, a 34% rise from the $12.95 billion in 2010's fourth quarter.
While revenue fell slightly short of Wall Street's expectations, earnings were more than double the predicted 17 cents a share. Amazon.com had given fourth-quarter guidance with a revenue range of $16.5 billion to $18.7 billion.
Amazon.com revenue got a healthy boost from sales of Kindle Fire, the tablet and e-reader running Goolge Inc.'s (Nasdaq: GOOG) Android software. Total sales of the Kindle Fire and other e-reader devices increased 177% in the nine-week 2011 holiday season compared to the same period in 2010. The company reported that Kindle Fire is the No. 1 selling product available on Amazon.com since it was introduced in November.
Case-Shiller Home Price Index: U.S. Housing Market Nearing Bottom in 2012
The S&P/Case-Shiller Home Price Index showed another decline for November 2011, its third straight monthly loss, as the U.S. housing market trends toward a bottom this year.
Home prices in both the 10-city and 20-city measures of the Home Price Index fell 1.3% from October. Prices fell 3.6% and 3.7% from November 2010, respectively.
The Case-Shiller Home Price Index has fallen steadily since September. Prices in October fell 1.1% and 1.2% from the month before for the 10-city and 20-city indices.
The home price report was on par with what economists expected, as they see this year bringing an end to drastic price declines.
Monday's STOCK Act Vote Could End a Major Congressional Perk
Members of Congress could be one step closer this week to losing one of their most profitable perks, thanks to the STOCK Act (Stop Trading on Congressional Knowledge Act).
The Senate will hold a procedural vote today (Monday) on a bill that prohibits Congress members from using nonpublic information to make stock transactions – known as "insider trading" when conducted by corporate insiders. Today's vote could put a time limit on passing the bill, which the Senate will continue debating this week.
Congress has faced increasing backlash lately for its growing list of financial advantages over the Americans it represents. A CBS News' "60 Minutes" program in November 2011 exposed Congress insider trading – elected representatives trading stocks related to hot topics being debated in Congress before information had been disclosed to the public.
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