JP Morgan Downgrades Yum Brands

Analyst John Ivankoe says the global restaurant franchise company's China business is not a margin improvement story

JP Morgan downgrades Yum Brands (YUM ) to neutral from overweight.

Analyst John Ivankoe says after spending time in China, his initial conclusion on the opportunity for the company's China business did not substantially change to warrant a further increase in the implicit 35 times to 40 times multiple of the company's China business.

He believes China is not a margin improvement story. Lower than average new unit volumes are matched with higher labor costs and partially offset by supply chain leverage.

Ivankoe also notes competition for mid-level management is fierce and considerable additional general and administrative costs are needed to support future unit/market development.

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