Image: China (Brand X-SuperStock)
Yum Brands
(YUM) dropped the other drumstick on Jan. 7.
An 8-K report filed with the Securities & Exchange Commission on Dec. 21 said that a Dec. 17 Chinese TV story about high levels of antibiotics found in KFC chicken in China from two Chinese suppliers would have a moderate impact on sales in China. Moderate, the company told Wall Street analysts in guidance ahead of the company's Feb. 4 earnings report, would amount to a 4% drop in same-store sales in China in the fourth quarter.
On Monday, the company filed another 8-K report that lowered guidance to a 6% drop in same-store sales in the quarter. That's a huge decrease in sales during the last two weeks of the quarter. Credit Suisse estimates that same-store sales must have showed a 15% to 20% decline in the last two weeks of the period to produce this large a shift for the quarter as a whole.
It's not clear to me that Wall Street earnings estimates have yet caught up to the shift. Sixty days ago, the consensus for 2012 earnings at Yum Brands was $3.27 per share. Now it's $3.25 per share. Estimates for the fourth quarter have dropped to 83 cents a share from 85 cents a share 60 days ago.
The shares did drop 4.2% the day following the news to close at $65.04, but that is still substantially above the $63.88 low on Dec. 21 and only partially reverses the climb to $68.32 on Jan. 4 from that post-guidance low.
I think we're likely to see more -- if modest -- downward pressure on the stock through earnings as investors fret about the very real possibility of an earnings miss or negative guidance for the first quarter of 2013. Or both.
I'd wait on these shares.
At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. The mutual fund he manages, Jubak Global Equity Fund(JUBAX), may or may not own positions in any stock mentioned.
 The fund did not own shares of Yum Brands as of the end of September. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here.