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For restaurants, weather excuse is gone this earnings season

FILE - This Wednesday, June 6, 2012 file photo shows a Taco Bell restaurant in Richmond, Va. Taco Bell said Friday, Aug. 31, 2012, that it's adding Mtn Dew A.M — a mix of Mountain Dew soda and Tropicana orange juice — to its breakfast menu, which was rolled out earlier this year at select locations. (AP Photo/Steve Helber, File)

Yum Brands (YUM), the third-biggest U.S.-based restaurant by market capitalization, got earnings season for the nation's largest restaurant chains started in a rather muted fashion.

The owner of Taco Bell, Pizza Hut and KFC earned 73 cents a share for the quarter, in line with the current FactSet expectation, but a penny better than where estimates stood a few days ago. Revenue, however, was $3.20 billion, slightly short of the $3.23 billion consensus. While that's hardly a major miss, it's not much to cheer, either. Its shares, which reached an all-time high this week, fell 2% in after-hours trading Wednesday, following the report.

China, where Yum's results were hurt last year by worries about Avian flu, continued to recover, with system sales increasing 21% for the division. Yum also repeated its earlier projections that full-year earnings per share for the entire company would rise at least 20%. For Taco Bell and KFC, same-store sales rose 2%. At Pizza Hut, they were down 3%.

It's something of a so-so step in an earnings season for which investors clearly are hoping for better than what they got in the first three months of the year. Last quarter, 17 of the 25 largest stocks measured by market cap missed analysts' sales or earnings expectations, or, in some instances, both. Many said winter storms lowered their results. But investors tend to find the weather excuse, like the impact of when holidays fall on the calendar, far from a satisfactory explanation, especially when it means full-year numbers won't be recovering.

As a result, 13 of those 17 who fell short saw their stock prices decline after earnings. If there's a surprise in this, it's that four managed to avoid dropping.

Over the next few weeks, another set of quarterly results will roll in, and this time, there won't be any snow to blame for disappointments. Of the 25 largest, 22 are expected to report earnings per share that are up from a year ago, with an average gain of 14.5%.

Sales growth for the group is slated to average 3.5%. However, several chains are in the process of selling company-owned stores to franchisees, as, for example, Wendy's (WEN) has done. This reduces corporate revenue. Even so, improving revenue significantly has been a challenge for several companies amid the tremendous competition for guests who may be reluctant to eat out due to higher prices and lingering worries about the economy.

Same-store sales is a more telling reading, as it combines the effects of visitor counts, any price changes and the items being chosen from the menu, while excluding the impact of revenue from opening new stores. On average, a 2.6% increase in same-store sales is foreseen.

Here are a few other names to watch:

Chipotle (CMG). The burrito establishment should have the strongest year-over-year sales growth, at 20.7%, of any of the 25 top restaurants, analysts surveyed by FactSet believe. Same-store sales, estimated at 10.5%, would be the best in the group by a wide margin. Earnings missed estimates in the first quarter, contributing to a 5.9% drop in the shares afterward. The stock peaked in March, but it remains up 12% for the year. Chipotle is an interesting study in restaurant economics, because it owns all its stores, meaning the corporate office gets both the revenue and the costs of doing business. Estimates are for a profit of $3.08 a share and revenue of $986 million when the company reports July 21.

McDonald's (MCD). The largest publicly traded American food chain, measured by system-wide sales and market cap, is set to report July 22. Its stock reached a record of $103.78 during the quarter, and as of July 14, it was trading at a greater premium to its average forward price-to-earnings ratio than it was at the end of the first quarter. Shares of McDonald's rarely move much after earnings reports, only twice changing more than 3% in the past four years of reports.

Still, it's a component of the Dow Jones Industrial Average, and with operations in more than 100 countries and system sales near $90 billion, it's practically an economic indicator on its own. Traffic has stopped growing, so any comments around that will be important, as will discussions regarding its renewed concentration on its top markets and core menu. It should earn $1.44 a share, with revenue of $7.3 billion.

Buffalo Wild Wings (BWLD). Shares had a stellar 2013, doubling in price, but in the first quarter they lost 3.2%. Thanks to a turnaround, the chicken seller's stock is now up 5% in 2014. That's about to be tested, as Buffalo Wild Wings is expected to have the second-best percentage improvement of the group in both year-over-year EPS and sales, at 34.1% and 17.7%, respectively. With its beer, hot wings and TVs, the company surely got a boost from World Cup-related traffic, at least somewhat. Earnings of $1.18 a share are expected when the company reports on July 29, with sales of $359 million.

Arcos Dorados (ARCO). It's not a household name in the U.S., but this operator of McDonald's franchises in the Caribbean and Latin America is worth noting because of its valuation. At the end of the first quarter, it was down almost 19%, but in the last three months it's lifted. It's still down 14.5% from Dec. 31. However, it's gone from a 19.9 forward multiple in March, when it traded at a 2.1-point discount to its long-term 22 average, to a 25 multiple and a 2.8-point premium to the current average of 22.2. With that, as of midday July 14, Arcos Dorados had the most pronounced upside P/E reversal among 42 restaurant stocks Yahoo Finance tracked in that span. A strong report and that premium probably stays. A bad one, and it vanishes.