On Monday Stockmaster Eric Cheshier wrote an article on Yum Brands that was right on target. However,  shares were up today but are down after hours due to some margin concerns. We’ll just have to see how shares trade when the market opens. Here are the notes from the call courtesy of Forbes:
Fast-food company Yum Brands Inc. said Wednesday its second-quarter profit grew 4 percent as its overseas operations delivered hefty earnings that offset slumping U.S. profits dragged down by higher commodity costs.

Quarterly revenue rose 12 percent to nearly $2.7 billion. Same-store sales grew by 14 percent in mainland China and 4 percent in the international division.

For the year so far, Yum had net income of $478 million, up 17 percent from a year ago. Revenue for the first half of this year was up 10 percent at nearly $5.1 billion.

Yum shares rose $1.01, or 2.85 percent, to close at $36.47 Wednesday before the results were released. Shares were down $1.87 in after-hours trading.

Edward Jones analyst Jack Russo said the rising commodity costs presented a strong headwind against second-quarter sales.

“There’s disappointment that despite the pretty good sales growth in China, the margins were weaker than expected and a lot of that is food cost inflation,” Russo said. “It’s certainly a sign of the times.”

Operating profit in Yum’s fast-growing China division surged 38 percent to $90 million in the second quarter. The company said commodity inflation in the division amounted to about $16 million for the quarter and $27 million so far for the year.

Yum said it added nearly 100 restaurants in China during the quarter and said the pace of new development in 2008 is ahead of last year’s record pace. Yum predicted it will reach 3,000 units across 500 cities by year’s end; it currently has 2,726 stores in China.

In Yum’s international division, operating profit climbed 18 percent to $120 million. Yum said franchise fees grew by 22 percent in the division and are expected to reach about $675 million for the full year. Yum opened 160 new units in more than 20 countries during the quarter and expects to have 750 new restaurant openings for the full year in the division.

Meanwhile, operating profit in the U.S. fell by 12 percent to $168 million, which the company blamed mainly on commodity inflation along with weak sales and profit results at KFC.

Commodity costs in the U.S. escalated by $30 million in the quarter compared to a year ago, Yum said, and for the full year the company expects record commodity inflation exceeding $100 million.

Yum said its latest earnings-per-share forecast of $1.89 per share for the full year is prior to net gains from special items amounting to up to 6 cents a share.

The company’s brands also include Long John Silver’s and A&W All-American Food Restaurants.

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