Yum! Brands, Inc. (YUM), McDonald’s Corporation (MCD): What Happened And Why?

Competition might have become a little tough for Yum! Brands, Inc. (NYSE:YUM), but the company is well positioned overall. Yum! has growth prospects in all its divisions, including the US, China, India and Yum! Restaurants International (YRI). Yum! gets around 25% of its revenue from its YRI division, and the company is expanding its operations in the rest of the world. About 205 units were opened in the last quarter, of which 87% were franchises. Franchise openings indicate demand in the region.

The bottom line

Investors seem cautious and doubtful, after seeing the slow growth pace of the Chinese economy. However, Yum! Brands, Inc. (NYSE:YUM) is trying to diversify its market instead of confining itself to China. The company is not sitting idle and waiting for the Chinese economy to recover and post strong numbers. Yum! is working hard to strengthen its markets in other parts of the world, including the UK and Ireland, to reduce its reliance on a single market.

The Chinese population considers Western outlets, such as KFC, to be benchmarks for class and quality. A problem like high levels of antibiotics in the chicken can hurt brand perception and hit consumer confidence very badly.

What needs to be noted is that the company did not change its current year outlook in China. It is optimistic about the recovery and forecasts that results should turn positive in the fourth quarter of the year. I believe Yum! Brands, Inc. (NYSE:YUM) is a perfect stock for long term investors. The stock may appear a bit difficult at the moment, but patient investors could gain from considering a low-cost position. This is not the first time Yum! has witnessed a road bump in China, and it has successfully handled similar crises before. The stock has strong growth potential, and its current setbacks are temporary.

The article This Looks Like A Yummy Long Term Investment originally appeared on Fool.com.

Rajesh Marwah has no position in any stocks mentioned. The Motley Fool recommends McDonald’s and Starbucks. The Motley Fool owns shares of McDonald’s and Starbucks. 

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