THE HEDGEYE BREAKFAST MENU
Notable price action and news items from the restaurant space.
MACRO
Commodities
Corn and wheat fell over the last day as investors speculated that a slowing U.S. economy may cut into demand. Beef prices are likely to be supported by the abandonment of corn crops in Texas as 99% of the Lone Star State is in one level of drought or another by the last week of July. With farmers turning off water and abandoning parts, or whole fields, of corn, we see this only as supportive of extended elevated prices in beef.
QUICK SERVICE
- DNKN is hosting its earnings call for 2Q earnings at the time of writing. 2Q earnings were released earlier this morning with net income down 60 bps year-over-year. Comps were up 3.2% in the U.S. Dunkin’ Donuts derives 97% of its revenue from the U.S. We see the revenue, operating income, and net income growth as being far below those of SBUX despite the massive differential in the stocks’ respective valuations. We are not convinced by the DNKN growth story, particularly at this price.
- PEET reported strong EPS for 2Q, beating expectations solidly with $0.38 versus consensus EPS of $0.32. The company raised full-year revenue guidance as revenues also beat convincingly in the quarter. EPS should be towards the higher end of the previous guidance range of $1.43 to $1.50, according to management.
- PZZA missed consensus expectations in the second quarter with EPS of $0.47 versus $0.48. The company reaffirmed EPS of $2.02 to $2.12 for the year versus consensus of $2.12 but stated that it expects the current competitive pricing and promotional environment in the pizza category and the unfavorable impact of projected commodity cost increases, most notably cheese, to continue throughout the rest of the year.
CASUAL DINING
- DIN reported disappointing 2Q earnings, posting $0.90 ex-items versus consensus of $1.02. The stock sold off over 18% yesterday.
- DIN was upgraded by Morgan Keegan this morning to “Outperform”.
- PFCB was downgraded to "Sell" from "Buy" at Argus Research.
Howard Penney
Managing Director
Rory Green
Analyst
