Yum Rises After Naming Corvex Founder Meister to its Board

In a statement, Meister made it clear the company could take one of a number of actions to improve shareholder value. Corvex Management LP is an activist hedge fund that was established in 2010 with the backing of reputable investor George Soros. The Analysts at Credit Suisse lowers the price target from $86 per share to $75 per share.

The company said its updated profit outlook also reflects unfavorable currency exchange rates. The company estimated that China same-store sales for the fourth quarter could range from 0% to 4%. Yum! expects positive same store growth from KFC and negative growth from Pizza Hut Casual Dining in China in the quarter. It expects Earnings Per Share (EPS) to remain flat or grow partially, but in single digits. By contrast, McDonald’s shares are up 6% over the same period.

Yum made the appointment as it announced it has neared the end of a yearlong strategic review of the company’s structure. Brands, Inc. (NYSE:YUM). The rating major has initiated the coverage with an neutral rating on the shares. Brands now sources more than half of its revenues from China, but amid food safety scandals and a general fast food consumption lull in the country, the company’s aggregate top and bottom lines have been dented badly over the past year or so. “The Yum! Board comprises a group of active and engaged directors, and we look forward to benefitting from Keith’s vast experience and his input prior to the conclusion of our review”. Meister runs Corvex, which is Yum’s biggest shareholder.

“We continue to believe the largest opportunity for the stock is for Yum Brands to be restructured in a way that makes sense for this century”, he wrote, “not the current grouping centered around three large businesses … an arrangement that was essentially the decision of a long-separate beverage and snack foods company made last century”.

Yum! Brands adds in the press release that Meister’s appointment is effective on October 16, 2015.

“We have had constructive dialogue with the board and management over the last several months”, Meister said.

Meister called for Yum to cut its China business in order to create more shareholder value and form an entity that will be “levered to the endless growth to the Chinese middle class”.

With the election of Mr. Meister, the Yum! It is worth mentioning that the election of Carl Icahn’s protégé extended the company’s Board to 14 members and comes after Yum!

Ongoing volatility in China and a strong dollar led Yum!

Overall, full-year EPS growth will take an impact of 1-2 percentage points due to foreign exchange, Yum says, and now forecasts EPS growth to range from flat to low-single-digit positive.

The company reported system wide negative same store sales for the first time in four years in 2014 amidst its downfall in China, and that trend has continued to haunt investors through this year.