A Yummy Yum! Brands?

The company's first-quarter net income actually dropped 14% to $218
million, or $0.46 per share, even though the company's headlines touted
14% profit growth "excluding special items." The special items included
a $100 million pre-tax gain in 2008 from the sale of its interest in
KFC Japan as well as U.S. "business transformation" gains/losses from
refranchising and restructuring in 2009.

Global sales growth increased 4% before currency translation, with
China jumping 12% -- quite a difference from the 2% decline that Yum!
Brands experienced in U.S. sales; however, including the currency
effects, net sales actually fell 8% to $2.2 billion. Worldwide
same-store sales increased just 1%.

I'm not quite sure why investors responded so enthusiastically to the quarter. As far as I can tell, rival McDonald's (NYSE: MCD) had a far more impressive quarter
earlier this week, although its revenue also dropped due to the strong
dollar; however, its same-store sales clocked in at a much more
impressive rate, and it did increase profit. Of course, maybe the fact
that Yum! beat analysts' expectations of $0.40 per share whipped up an
enthusiastic response.

Yum! Brands has an array of popular and well-known fast-food brands,
including Taco Bell, KFC, and Pizza Hut, and a lot of investors also
like the stock because of its continued expansion into the Chinese
market. Meanwhile, I'm sure it was heartening that Yum! Brands stuck to
its guidance for 10% earnings growth in 2009.

I thought Chipotle (NYSE: CMG) (NYSE: CMG-B) looked pretty darn overpriced
after its recent quarterly results, but I also think Yum! looks a tad
pricey at 18 times trailing earnings, especially after a
not-overly-inspiring quarter. I prefer McDonald's, a leader in the
fast-food sector, which also includes Burger King (NYSE: BKC) and Wendy's/Arby's (NYSE: WEN). Plus, McDonald's has been firing on all cylinders and trades at just 14 times earnings.

Maybe I'm underestimating the future growth of Yum! Brands'
international expansion, but Yum! Brands isn't a stock I find too
tempting right at this moment. Waiting for a little less euphoria
surrounding the stock might make for a better buying opportunity.

Chow down on some related Foolishness:

four-star stock poised to pop.In February, fellow Fool Anders Bylund relished Yum!'s tasty quarterly profit.

© 2009 UCLICK, L.L.C.