This Restaurant Stock Is Appetizing

Strange -- it looks like somebody's got a special recipe that's magic in this market. The difficult times don't seem to be getting to Yum! Brands (NYSE: YUM  ) much at all.

Third-quarter net income increased 4.4% to $282 million, or $0.58 per share. Total sales increased 10.6% to $2.84 billion. Global same-store sales increased 3% in the quarter, its 20th consecutive quarter of same-store sales growth, with China comps contributing positive 5%, and even comps in the beleaguered U.S. market increasing by a decent 3%.

Granted, earnings were helped along by a favorable tax rate and the company's buyback as well (which it said helped offset weak profit performance in the U.S.), but still, given the pain that's been hitting the economy, it seems investors would find it hard to complain.

After all, high commodity prices and precipitously slower consumer spending are concerns for many restaurant stocks; consider Chipotle's (NYSE: CMG  ) (NYSE: CMG-B  ) rather cryptic profit warning several weeks ago. And of course, there's also Buffalo Wild Wings (Nasdaq: BWLD  ) , although some investors might be concerned that due to the current climate's high costs and slow consumers, some are steering clear simply due to its high valuation, as it has performed quite well lately, running up nearly 40% in the last six months.  

Yum! Brands, which runs the Taco Bell, KFC, and Pizza Hut chains, reiterated its guidance for 2008 -- it expects to report $1.89 per share, or 12% earnings growth -- and announced continued overseas expansion plans.

I've followed fast food peer McDonald's (NYSE: MCD  ) more than I have followed Yum!. And of course, I've found McDonald's to be a great stock for investors to buy or hold on to despite the difficult times since consumers have been gobbling up its inexpensive, fast-food fare.

Then again, it seems that Yum! has been managing a similar feat, luring customers to its restaurants, which give them lots of inexpensive options. In addition, it's trading at a similar multiple to McDonald's, at just 15 times earnings, and has delivered an annual dividend yield of 2.80%. Apparently, the market has given Yum! a beatdown along with many other stocks, seeing how its shares have fallen 26% in the six months, so bargain hunters might want to be on the alert. Yum! Brands shows that not all restaurant stocks are unappetizing in this admittedly scary environment. 

Order up some related Foolishness:

• Yum! Brands was recently a 4-star stock ready to pop.
• One Fool nominated Yum! as a recession-proof stock.
• Another Fool tapped it as a nominee to be the best stock for 2008.