• run with the bulls

    get your first month

    of hedgeye free


Triangulating Latin America

Topics/Questions Addressed:

  • Does the Rally in Brazilian Equities Have Legs?
  • Is It Time to Hedge Against a Pullback Across EM Asset Classes?
  • Mexico’s Stagflation Problem

Does the Rally in Brazilian Equities Have Legs?

After being down just over -18% in 2011, Brazil’s benchmark equity index, the Bovespa, is off to a +16% start in the YTD. The question now, however, is: can the rally sustain itself? That is, are Brazil’s intermediate-term macro fundamentals strong enough to convince investors who may have missed the rally to participate?


Looking at how we screen for country-level opportunities, the quick answer is yes – for now. Our proprietary GROWTH/INFLATION/POLICY modeling puts Brazil in the equity-supportive Quadrants #4 and #1, in 1Q12 and 2Q12, respectively.


Triangulating Latin America - BRAZIL


Using this standardized framework allows us to efficiently vet where we could be wrong, which is what we spend the majority of our time researching.


From a policy perspective, Brazil looks to continue employing growth-supportive monetary and fiscal policy. Last week, the Finance Ministry unveiled R$55 billion in cuts from the 2012 budget (R$35B from discretionary spending; R$20B from mandatory programs) to continue making room for the central bank to ease monetary policy. Per Finance Minister Guido Mantega:


“With lower rates, the country will grow more… When the state saves more and inflation is falling in the country, we’re able to open room to reduce interest rates.”


His commentary is generally in line with how we view fiscal policy’s effect on rates of inflation within an economy. Turning back to the budget specifically, we see that social expenditures such as anti-poverty programs and construction of low-income housing were spared from the cuts. Populist measures like this will continue to give President Rousseff clout with Brazilian voters and strengthen her combative stance against corruption and union demands.


The budget does, however, assume +4.5% GDP growth for the year, which is ~100bps higher than our current projection (subject to change w/ new data), imposing the risk that they come in light on the revenue front should growth come in below the official target.


Looking at monetary policy, both pressure from Rousseff/Mantega and the central bank’s latest commentary suggest that Brazilian interest rates are headed lower in 2012 – perhaps even below 10% (from 10.5% currently), according the central bank’s “high probability” scenario. Brazilian rate markets continue to take fiscal and monetary policymakers’ guidance on interest rates quite literally, pricing in roughly -120bps of cuts over the NTM.


Triangulating Latin America - 2


Inflation is where we think Brazil could “miss” relative to current expectations. According to the same “high probability” scenario, Brazilian CPI is projected to fall to the mid-point of the target range of +4.5% +/- 200bps (from +6.2% YoY in JAN) by year-end. To put it simply, there is a near-Bernank (“zero percent”) chance that this will happen if global energy prices continue to make higher intermediate-term highs and remain in Bullish Formations quantitatively.


As of now, the Bovespa remains a semi-defensive play in a rising inflation environment, with 42.3% of the index’s market cap weighted to energy and basic material companies. At a point, however, rising profits at companies like Vale and Petrobras will come at the expense of the Brazilian consumer, producer, and economy at large. Additionally, we’d be remiss to forget that the Bovespa failed to participate in the 1H11 Global Inflation Trade, peaking in early NOV ’10 – just shortly after Qe2 was officially announced.


Triangulating Latin America - 3


All told, we continue to like Brazil fundamentally, but certainly not at every price and level of inflation expectations. What would get us to buy Brazil is twofold: 1) stability in the U.S. dollar (i.e. a TRADE-duration breakout); and 2) a subsequent deflating of the inflation to create lower, more attractive prices (Bovespa’s trailing 30-day correlation to DXY = -0.84). Our quantitative risk management levels on the Bovespa are included in the chart below.


Triangulating Latin America - 4


Is It Time to Hedge Against a Pullback Across EM Asset Classes?

Investors in emerging market assets have seen a fair amount of green on their screens in the YTD; to generalize:

  • The MSCI EM Equity Index is up +16.2%;
  • The Morgan Stanley EM Local Currency Debt Fund is up +18.4%; and
  • The JPMorgan EM Currency Index is up +6.8%.

While the long-term growth fundamentals remain supportive of EM perma-bull storytelling, it’s fair to attribute a good deal of this performance to a relief rally of sorts stemming from the waning of systemic pressure within the Eurozone (as quantified by the Euribor-OIS spread), as well as a dramatic decline in global cross-asset volatility. To measure the latter point, we’ve created a proprietary index that uses an unequally-weighted average of the following volatility indices:

  • CBOE SPX Volatility Index (VIX);
  • Merrill Lynch Treasury Option Volatility Estimate Index (MOVE);
  • CBOE Oil ETF Volatility Index (OVX);
  • JPMorgan Global FX Volatility Index; and
  • JPMorgan EM FX Volatility Index. 

Triangulating Latin America - 5


On this metric, global cross-asset volatility is down -18.2% in the YTD, making it easier for global investors to extend the duration of their research (obvious L/T bullish theses across the EM universe) and for EM corporates and sovereigns to raise capital. This intuitive interpretation is supported by the math: the MSCI EM Equity Index (as a rough proxy for EM assets) has a -0.88 correlation to our proprietary Global Macro Volatility Index on a trailing 3-year basis.


Importantly, our index is at levels last seen since JUL ’11. As risk managers, we should be asking ourselves if this level of cross-asset volatility is sustainable over the intermediate-term. While only a crystal ball would give us the rightful answer to this question, we can make educated guesses based on handicapping what we see as meaningful catalysts coming down the pike.


On this basis, a potential sovereign debt scare in Japan (MAR), a likely downward revision to China’s growth target (early MAR), and accelerating global stagflation on a rolling basis due to the perpetuation of Weak Dollar Policy out of the U.S. all suggest that continued lower-highs in cross-asset volatility is increasingly less likely over the intermediate term. Given, we would support being appropriately hedged against a correction across EM asset classes, which have historically been highly correlated as highlighted in the table below.


Triangulating Latin America - 6


Key breakdown levels to watch across the EM debt space are included in the charts below. Gol’s (Brazil’s 2nd-largest airline by market value) recently-shelved $200M perpetual bond offer and Argentine corporates continuing to be shut out international capital markets (five consecutive months w/o a deal being priced) could be canaries in the coal mine for broader weakness over the intermediate term.


Triangulating Latin America - 7


Triangulating Latin America - 8


Mexico’s Stagflation Problem

Recently, Mexico reported that its Real GDP growth slowed to +3.7% YoY in 4Q11 vs. +4.5% in the prior quarter. Alongside a sequential acceleration in Headline YoY Inflation in the quarter, Mexico’s economy closed out 2011 in Quadrant #3 of our G.I.P. analysis. More importantly, adopting our model’s baseline estimates, the country looks to stay put throughout 1H12.


Triangulating Latin America - MEXICO


Flat-to-down JAN PMI data (Manufacturing flat and Services down -2.6 pts. MoM) and accelerating inflation (CPI +4.1% YoY vs. +3.8% prior) amid the worst drought on record (higher domestic food costs) suggests our baseline outlook is off to a fairly accurate start. Furthermore, from a modeling perspective, we risk not being aggressive enough to the downside and upside with our growth and inflation assumptions, respectively, in the face of what we’ve chosen to label as The Bernank Tax.


Mexican rate markets agree with our view that Mexico’s Indefinitely Dovish central bank (benchmark held at a record-low 4.5% since mid-’09) may have to, at a bare minimum, talk hawkishly in the face of CPI likely remaining above their upside target of +3-4% for the intermediate term. 1yr O/S interest rate swaps and 1yr L/C sovereign debt yields are pricing in +37bps and +1bps of tightening over the NTM and this spread has been making higher-lows since SEP – in the face of other Latin American economies’ spreads making lower-highs over the same duration.


Triangulating Latin America - 10


All told, Mexico is the Latin American economy we view most at risk of experiencing stagflation over the intermediate term; as such, we are unfavorably disposed to their equity market.


Fundamental Price Data

All % moves week-over-week unless otherwise specified.

    • Median: +0.8%
    • High: Colombia +2.6%
    • Low: Brazil, Mexico -0.5%
    • Callout: Mexico +2.6% YTD vs. a regional median of +16.3%
  • FX (vs. USD):
    • Median: +0.2%
    • High: Chilean peso +0.8%
    • Low: Argentine peso, Mexican peso -0.1%
    • Callout: Argentine peso -1.1% YTD vs. a regional median of +8.4%
    • High: Colombia +22bps
    • Low: Mexico +1bps
    • Callout: Colombia up +32bps YTD vs. Brazil -69bps
    • High: Mexico +4bps
    • Low: Brazil -2bps
    • Callout: Mexico +46bps over the last six months vs. Brazil -85bps
    • High: Mexico +3bps
    • Low: Colombia -19bps
    • Callout: Mexico -7bps YTD vs. Brazil +43bps
  • 5YR CDS:
    • Median: -3.8%
    • High: Colombia -2.9%
    • Low: Chile -8.1%
    • Callout: Regional posting a YTD median decline of -16.9%
    • High: Chile +10bps
    • Low: Mexico -3bps
    • Callout: Colombia +70bps YTD vs. Brazil -78bps
    • High: Brazil +1bps
    • Low: Chile -9bps
    • Callout: Colombia +18bps YTD vs. Brazil -58bps
  • CORRELATION RISK: The MSCI Latin America Equity Index is trading with an inverse correlation to the U.S. Dollar Index of -0.87 on a trailing 30-day basis.

Darius Dale

Senior Analyst



We can definitely be accused of not being a bull on CMG, but we have not been short either.  Either way we have a keen eye on trying to figure out when store growth is going to slow meaningfully.  Trying to guess same-store sale trends is not a reason to be short CMG.  The real question is when will incremental returns on new units slow?  When will the company need to slow the unit growth rate?  For the time being we are not there yet, but the recently filed 10-K offers some signs that the company is maturing.


Some highlights from the 10-K:

  1. CMG is now looking to “fine-dining” for inspiration
  2. Supply problems - the numbers of store serving you basic fast food chicken and beef is growing
  3. Per store labor costs are increasing
  4. Development costs have stopped going down and could increase in 2012
  5. Inflation is still a concern  




OLD PHILOSOPHY: Chipotle began with a simple philosophy: demonstrate that food served fast doesn’t have to be a traditional “fast-food” experience. Over the years, that vision has evolved. Today, our vision is to change the way people think about and eat fast food.


NEW PHILOSOPHY: Our vision is to change the way people think about and eat fast food. We do this by avoiding a formulaic approach when creating our restaurant experience, looking to fine-dining restaurants for inspiration.  We use high-quality raw ingredients, classic cooking methods and a distinctive interior design and have friendly people to take care of each customer—features that are more frequently found in the world of fine dining.   Our approach is also guided by our belief in an idea we call “Food With Integrity”.   Our objective is to find the highest quality ingredients we can—ingredients that are grown or raised with respect for the environment, animals and people who grow or raise the food.


HEDGEYE: CMG is now thinking in terms of a “fine dining” experience – talk about raising the bar in QSR!!





OLD PHILOSOPHY: Serving high quality food is what motivates us and is critical to our vision to change the way people think about and eat fast food.   As part of our Food With Integrity philosophy, we believe that using fresh ingredients is not enough, so we spend time on farms and in the field to understand where our ingredients come from and how the animals are raised.


NEW PHILOSOPHY: Serving high quality food “while still charging reasonable prices” is critical to our vision to change the way people think about and eat fast food.  As part of our Food With Integrity philosophy, we believe that using fresh ingredients is not enough, so we spend time on farms and in the field to understand where our food comes from and how it is raised.  Because our menu is so focused, we can concentrate on where we obtain each ingredient, and this has become a cornerstone of our continuous effort to improve our food.  As of December 31, 2011, we were serving exclusively naturally raised meats in all of our restaurants in the U.S. Continuing to serve naturally raised meats in all of our restaurants is one of our goals, but as discussed below, we have and will continue to face challenges in doing so. Some of our restaurants served conventionally raised chicken or steak for much of 2011, a few markets reverted to conventionally raised beef in early 2012, and more of our restaurants may periodically serve conventionally raised meats in the future due to supply constraints. We define naturally raised as coming from animals that are never given antibiotics or added hormones and that are raised responsibly—that is, in accordance with our animal welfare standards.


HEDGEYE: CMG sees the need to raise prices to execute on the current business model.  It’s going to get harder for the company continue to grow at the current pace and keep is integrity with customers and that will find it harder to claim they serve naturally raised food!  As of December 31, 2010, about 80% of the restaurants served naturally raised steak and about 86% of the restaurants served naturally raised chicken.  These percentages, to our knowledge, are no longer disclosed. 





THE BASICS DONE RIGHT: Each restaurant typically has a restaurant manager (a position we’ve characterized as the most important in the company), an apprentice manager (in about three-quarters of our restaurants), one or two hourly service managers, one or two hourly kitchen managers and an average of 22 full and part-time crew members.


HEDGEYE: CMG took the average crew up by 2 people in 2011.





We operated 1,230 restaurants as of December 31, 2011. We plan to increase the number of our restaurants significantly in the next three years, and plan to open between 155 and 165 new restaurants in 2012.


HEDGEYE: CMG was looking at opening between 135 and 145 new restaurants in 2011.





“One of our biggest challenges is staffing new restaurants. We seek to hire only top-performing employees and to promote restaurant managers from our crew, which may make it more difficult for us to staff all the restaurants we intend to open. Constraints on our hiring new employees are described further below under “ Our business could be adversely affected by increased labor costs or difficulties in finding the right employees for our restaurants .”


HEDGEYE: CMG added this new caveat to its 10-K this year. 





“We also have lowered the average development cost of our new restaurants significantly in recent years, from about $916,000 in 2008 to about $800,000 in 2011, and expect development costs in 2012 to be similar to 2011. In the event we are not able to achieve the average development costs we expect for 2012 or sustain the benefits achieved in prior years, which could result from inflation, project mismanagement or other reasons, our new restaurant locations could also result in decreased profitability.”


HEDGEYE: CMG will no longer see the tail wind of declining development costs.  This fact coupled with accelerated development could lead to lower returns on incremental invested capital.  This point is critical to keep an eye on.





“Food prices for a number of our key ingredients escalated markedly during 2011 and we expect that there will be additional pricing pressures on some of those ingredients, including beef, chicken, rice and beans, during 2012. We could also be adversely impacted by price increases specific to naturally raised meats or other food items we buy as part of our Food With Integrity focus, the markets for which are generally smaller and more concentrated than the markets for commodity food products. Weather related issues, such as freezes or drought, may also lead to temporary spikes in the prices in some commodities.”


HEDGEYE: This was not as much of a problem in 2011 with double digit same-store sales.  What about 2012?



Howard Penney

Managing Director


Rory Green



Distortions in the Seasonal Adjustment Factor

After our claims post last week, "The Ghost of Lehman," we had a number of clients ask us if we could quantify the effect we discussed.  Lehman's Ghost is a distortion in the seasonal adjustment factors that the Department of Labor is using to treat jobless claims arising from the shock in the series in late 2008 - early 2009.  The Labor Department uses a five-year lookback in constructing its seasonal adjustment factor, which means that the '08-'09 shock continues to skew the data.  Essentially, the seasonal adjustment sees the increase in claims in September 2008 - February 2009 and reads it as a seasonal factor rather than as a bona fide shock. 


To estimate the extent of the distortion from the seasonal factor on this week's data, we examined the YoY increase in NSA claims in February 2009 (+88%) and then backed out the average YoY growth from September 2008 to February 2009 (+60%).  So the February 2009 growth is 28% above trend, YoY.  This should be a rough approximation of the contribution of the seasonal factor from that year.  Since the overall seasonal adjustment takes a five-year average, we divide this number by five to get a 5.6% increase.  The conclusion is that this week's claims data is 5.6% understated.  Instead of being 351k, it should really be 372k.


What's Next? 

This week of the year captures the maximum benefit from the distortion - i.e. claims are understated in the last weeks of February by the largest amount.  From now through May, the understatement disappears.  Absent an underlying trend in the series, this effect would drive claims higher by about 20k over the course of the next three months.  By July, the distortion reappears, this time as an overstatement, pushing claims slightly higher still. From July through year-end, the distortion disappears, and the underlying trend will be reflected in the weekly data. 


Over the last year, claims have generally moved lower YoY (NSA) by around 10%.  Off of a base of 350-400k, this implies 35-40k improvement this year, or around 3-4k per month. This underlying trend is thus overwhelmed by the distortion for the next few months (as true improvement is masked by the understatement/tailwind reversing).  


This Week

The headline initial claims number rose 3k WoW to 351k (staying flat after a 3k upward revision to last week’s data).  Rolling claims fell 7k to 359k. On a non-seasonally-adjusted basis, reported claims fell 20k WoW to 345k.












2-10 Spread

The 2-10 spread widened 5 bps versus last week to 170 bps as of yesterday.  The ten-year bond yield increased 7 bps to 201 bps.






Financial Subsector Performance

The table below shows the stock performance of each Financial subsector over four durations. 




Joshua Steiner, CFA


Allison Kaptur


Robert Belsky


Having trouble viewing the charts in this email?  Please click the link below to view in your browser. 

Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.


Keith bought MGM in the Hedgeye Virtual Portfolio at $13.91.  According to his model, the TRADE support line is $13.52, and the TREND support level for MGM is at $11.68.



MGM is not for the faint of heart.  The stock has been on a tear YTD, rising 35% compared to a 8% gain in the S&P.  That’s what a lot of financial and operating leverage will get you in an improving environment.  Much of the investor optimism is attributed to better than expected performance on the Las Vegas Strip in Q4, which was confirmed in yesterday's conference call.  MGM derives over 60% of its EBITDA from the Las Vegas Strip.  While investors have focused on room rates – which have been strong – we think the incremental catalyst is slot volume.  That’s where the leverage is on the margin.  With a high debt levels and a fixed cost operating structure, continued improvement in Strip metrics will have a high flow-through to the bottom line, benefiting results in 2012 and beyond.





"Net revenues increased at eleven of our fifteen properties, including each of our properties outside of Mississippi, where the markets have been slow to recover from the flooding last spring and economic issues continue to negatively impact the market. We are continuing to utilize smarter marketing and targeted facility improvements to drive business and improve results.  Our operating successes in Florida, Colorado, Iowa and Missouri were able to largely offset the substantial difficulties facing the Mississippi markets and costs we incurred in Lake Charles while renovating the gaming floor of our primary riverboat and preparing to consolidate our operations."


- President and Chief Executive Officer Virginia McDowell



  • Cape G is similar to their operations in Waterloo, Iowa and Boonesville Missouri
  • Getting started on room remodel for the Lake Charles property
  • $1,165MM of debt with $496 term loans, $10MM on R/C. Have $200MM of borrowing capacity at the end of January 


  • Lake Charles had a lot of noise in the quarter with the ongoing renovations at the property
  • Paid down about $15MM of debt in the quarter. At the end of Oct they have $1.184BN and Jan they had $1.165BN
  • They think that the cost savings on the sale of the vessel in Lake Charles will be at least neutral to them if not beneficial.  
  • Sub debt becomes callable at par next month.  They will start to look at redeeming some of those notes opportunistically.  They also have some options on refinancing those notes 15-18 months before their maturity
  • Lake Charles will go from 1,782 to 1,262 slots, 51 tables to 40. No change in hotel rooms - still at 440-450.  They used the vessel for overflow on weekends and holidays so it shouldn't be an issue from a capacity standpoint. They are thinking about a potential on the 3rd deck if necessary - more likely for poker. 
  • Mississippi has been really challenged since the floods. Part of it is due to the tracks in Arkansas which had a big spike in business when the casinos in MS closed for flooding and only some of that business came back.  Biloxi was already weak before the floods. They had a lot more customers in that part of the country that had high teens unemployment and then also had a heavy impact from the floods
  • Impact of new competition on their Kansas City facility?  Geographically, we're the property that is farthest away, and with the construction complete on the bridge, traffic is flowing around and through to our property better than it did before. 
  • They can structurally take out the sub notes before the 7.75% seniors come due. As long as they meet the 2 to 1 covenant restriction within 15/18 months to maturity they can refinance those notes with Senior notes
  • The total business interruption receivable will be a lot larger than what they have received thus far. The discussions with BP were one time and separate from the insurance flood receivables. 
  • Pompano: no impact from Seminole Coconut Creek expansion.
  • They didn't quantify the impact from disruptions at Lake Charles. Aside from the hotel the casino floor disruption is done
  • Capex spending for Cape: 
    • $80MM left to spend. $20MM ish in the 4Q. Generally speaking, 50% of the spending is right at the end because that's when the FF&E gets ordered. 
  • Their leverage is 6.3x vs. 7.35x steps down after Cape opens in F4Q13 (one year from now)
  • Database skews more South and East than West in the Kansas City market. 
  • Thoughts on new opening in Biloxi? 
    • No
  • Step up in promotional spending. Will some of the new projects under way will they see more promotional spend?
    • Most of it was customer reinvestment.
    • Spike was temporary and surrounding new product launches at various properties
  • Majority of Iowan's are still against online poker
  • Cape G is tracking at or under budget



  • "We are looking to the future with optimism as we expect to open our Isle property in Cape Girardeau, Missouri by Thanksgiving of this year, subject to regulatory approval, at least a month ahead of our previous schedule."
  • "The Company's results benefitted from increased retail play as a result of generally favorable weather conditions in December and January, several recent facility improvements and continued strong marketing programs."
  • "In Boonville, revenue increased by 3.3% and EBITDA increased by 8%, despite having a buffet closed for renovation during the bulk of the quarter."
  • "With the recent declines in the unemployment rate, we are cautiously optimistic that our retail play trends could continue to improve as we have historically seen a high negative correlation between the unemployment rate in our markets and retail revenues."
  • "Our properties in Mississippi are suffering from a lagging economy and some lasting effects of the flooding which has impacted our overall results. Competition from race tracks in Arkansas, which increased following the floods, impacted revenue streams from Little Rock and several secondary markets."
  • "In Lake Charles, results were directly impacted by renovation disruption, which was completed in early February, and preparing to consolidate operations onto the larger remaining riverboat. We opened a new poker room, installed new carpet on the casino floor and completed other cosmetic refurbishments. We made the decision to invest in improving our product offering during the second and third fiscal quarters, and we believe we are beginning to see positive financial results from that investment. Additionally, we expect to benefit from a lower cost structure now operating only one facility.  We will continue to improve the customer experience with a $15 million refurbishment of the main hotel tower, which is expected to be completed by the end of the second quarter of fiscal 2013."
  • "We are also continuing to upgrade our food and beverage options across the portfolio."
  • "At Rainbow Casino in Vicksburg, we expect to complete the Lady Luck Casino rebranding by the end of the second fiscal quarter of fiscal 2013.  The rebranding will introduce upgraded amenities"
  • "Our upgraded customer rewards program, called Fan Club, is now active in Pompano and Waterloo." 
  • "The decrease [in corporate expense] is primarily due to development expenses in the prior year related to obtaining the Cape Girardeau and Nemacolin licenses.
  • "In the third quarter of fiscal 2012 we recognized $0.9 million of revenue as partial advances of our business interruption claim. Through February 22, 2012 we have received initial payments of $10.1 million related to the claims."
  • Nemacolin Woodlands Resort, Pennsylvania: "The appeal hearing for the gaming license awarded toNemacolin Woodlands Resort for the final resort license in Pennsylvania has been set for March 7, 2012. "
  • 3Q Capex: $11.7MM ($4.5MM related to Cape Girardeau)
  • "Capital expenditures for the remainder of the fiscal year to be approximately $45 million, including approximately $20 million in Cape Girardeau."








Initial jobless claims came in at 351k for the week ended 2/18 versus expectations of 355k and 351k the week prior (revised from 348k).


THE HBM: JACK, THI, CBOU, DRI, CBRL, TXRH - initial claims










JACK: Jack in the Box reported comps ahead of expectations: +5.3% at Jack in the Box and +3.8% at Qdoba versus expectations of +4.1% and +2.9%, respectively.  EPS came in at $0.27 versus $0.25 expectations.


JACK: Jack in the Box was reiterated “Buy” at Lazard.  The firm notes that average check appears to be improving along with better traffic, which could indicate a successful shift from heavy discounting, according to Street Account. The price target is $28.


THI: Tim Hortons reported 4Q EPS of C$0.65 versus consensus C$0.62.  Comps in Canada grew +5.5% versus consensus 4.8%.  U.S. comps came in at +7.2% versus 4.2% expectations.  The company announced a new $200m share repurchase program.


CBOU: Caribou reported 4Q EPS of $0.14 versus consensus $0.16.  Comps increased 5.6% in the quarter.





SONC: Sonic traded down -3.3% on accelerating volume.


PZZA: Top-line miss pushed the stock down -6.9% on accelerating volume.





DRI: Darden prereleased 3Q (quarter ended 2/26) earnings of $1.23-1.25 versus consensus $1.19.  Blended U.S. same-restaurant sales for Olive Garden, Red Lobster and LongHorn Steakhouse for 3Q will increase approximately 4% versus 2% consensus.  FY12 blended comps guidance was reaffirmed at +2.5-3.0% and FY12 EPS growth from continuing operations guidance was reaffirmed at 4-7%, consistent with prior guidance.









TXRH: Texas Roadhouse was reiterated “Buy” at Miller Tabak and the price target was raised to $21 from $19.


CBRL: Cracker Barrel PT raised to $62 at Morgan Keegan.  The stock is rated “Outperform”.





TXRH: Texas Roadhouse gained 6.7% on accelerating volume on strong 4Q EPS.


CBRL: Cracker Barrel took a step back after trading strongly on 2QFY12 EPS.


CAKE: 1Q12 guide-down hurt the stock yesterday.





Howard Penney

Managing Director


Rory Green



Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.