At the time of this writing, shares of Yum! Brands (NYSE: YUM), a company that competes with McDonald's (NYSE: MCD), Burger King (NYSE: BKC), and Wendy's/Arby's Group (NYSE: WEN), were trading higher by well over 4%. Volume was doing well, too. Interestingly enough, Yum! Brands will be reporting Q3 earnings on Tuesday, October 6, after the bell. Does this mean that you should buy in ahead of the release?
On the surface, I suppose the market is telling you that Yum! Brands would indeed make a good earnings trade. Not only is the stock up nicely this afternoon, but it isn't too far from a 52-week high.
Yet, there is some opinion out there predicting that things might not turn out as rosy as expected. The Fly On The Wall posted an item indicating that same-store sales for Yum! Brands could be weak.
Indeed, we're in a dicey time now. I believe Wall Street will be looking for all kinds of excuses to sell hot stocks. Shares of Yum! Brands certainly have been strong this year. Taking profits could be the next step.
Still, the story on the owner of Taco Bell, KFC, and Pizza Hut remains compelling to long-term investors. As we reported in our earnings preview, Yum Brands! has been pretty good about going beyond analyst projections, and management recently increased its quarterly dividend by over 10%.
So, if you're a long-term shareholder, you're probably in a good position going into the release. I doubt you have much to worry about. Plus, if the stock sells off, adding to the holding would be okay.
Traders, though, might want to stay away. With Yum! Brands trending so much higher today, I don't see a lot of justification in opening a short-term play.
Disclosure: I don't own any company mentioned; positions can change without notice.
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