Yum Brands Beats Estimates

Yum Brands (YUM, $27.88, up $0.38) said profits for its 3Q came in at $282 million, or $0.58 a share, up from $270 million, or $0.50, in the same quarter a year earlier. The company did well because of its operations in China, but the results were not “stellar”. China accounted for a 5% rise in same-store sales, here at home – 3%. Overall, Yum International sales rose 4%. The company’s restaurants include KFC, Taco Bell, Pizza Hut, Long John Silver’s and A&W Restaurants. The numbers weren’t bad and they beat the street by four cents but I was more interested to see how the stock was going to react. These restaurants are the heavy traffic fast-food places consumers target and hopefully this bodes well for another company we are following. McDonald’s (MCD, $54.57, down $0.40) should be announcing same-stores sales over the next few days and its earnings are due out on October 22. These are the two near-term catalysts that should help the stock move higher but we are facing strong headwinds right now with the current market turmoil. I profiled the November 65 calls (MCDKM, $0.70, down $0.05) yesterday at $0.90 and the March 55 calls (MCDCK, $6.40, unchanged) at $6.80. The stock dropped another $2.50 after the afternoon blog yesterday so many of you may have gotten in at lower prices. I had mentioned only taking “half positions” because the market had that feeling like it was going to add to Monday’s losses. By taking only a half position, we can leverage these trades if they head lower from your entry prices. This is another reason we went with the November and March 2009 calls. Rick Rouse Rick@OptionsMentoring.com]]>

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