Which Fast-Food Restaurant Stock has the Strongest Earnings Trends?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

Stocks with improving earnings metrics are worthy of your extra attention. Click here to discover our CHEAT SHEET stock picks now!

Here’s your Cheat Sheet to how the top 5 fast-food stocks rank via earnings trends:

Yum! Brands, Inc. (NYSE:YUM): Current Price $65.30

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 11,300 10,840 11,340 12,630 13,630
Diluted EPS ($) 1.96 2.22 2.38 2.74 3.38

The operator of the KFC, Pizza Hut and Taco Bell restaurants certainly has its act together, and we see good annual growth on both the sales and profitability fronts.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 4,111 2,743 3,168 3,569 4,153
Diluted EPS ($) 0.75 0.96 0.69 1.00 0.72

Unfortunately, though quarterly sales are growing strongly, EPS has taken a dive in the latest quarter. We’d rather move on from this one…