How sustainable is the business plan?

We are always trying to understand how sustainable any given business plan is.
  • Despite the maturity of the QSR category, capital spending as a percent of sales has been ticking up for three quick service restaurant companies. Given the overall macro environment for the industry, I do not believe that this is the right time to be accelerating growth. I watched this happen with the casual dining sector and we know how that played out - supply outpacing demand........
  • In this post, we are looking at CKR, JBX and SONC, specifically, and through calendar 2007, the trends don't look too alarming with both EBIT margins and capital spending as a percent of sales increasing steadily since 2004. The problem lies in the fact that EBIT margins (for JBX and SONC) are somewhat stable despite softening top-line results. For CKR, they need to reevaluate the whole business plan...
  • With stable margins, management can now justify the increased spending, because the returns appear to warrant such investment. However, as sales trends continue to weaken as a result of a tough environment (and increased value options) combined with our belief that higher commodity prices are not going away anytime soon, we expect to see increased pressure on EBIT margins - erasing the apparent returns of accelerating capital spending.

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

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McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

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Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

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Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

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Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

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6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

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Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

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Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

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A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

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Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

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Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

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An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

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