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STRIP: NOVEMBER BOMBED

As we wrote about in  “LV STRIP: AN UGLY PRINT COMING” (1/8/2013), the November Las Vegas Strip print of a 12.8% decline in gaming revenues was indeed “ugly”.  Adjusting for normal slot and table hold, Strip gaming revenues were down 7%.  Baccarat volume declined for the 1st time since May 2012 on a not so difficult comp of +16% last year.  That doesn’t sound like a recovery to us.

 

Gaming details:

  • Slot handle rose 4% and is flat on a rolling 3-month average
  • Slot win fell 10% as hold was 7.3% (compared with 8.4% in November 2011).  On a trailing twelve month average, slot hold was 7.6%.
  • Table volume excluding baccarat rose 5% YoY and +2% on a rolling 3-month average.  Table hold excluding baccarat was 10.0%, compared with 12% on a trailing twelve month average.
  • Baccarat volume fell 16% (compared with 16% growth in November 2011); this is the 1st decline since May 2012.
    • Baccarat win fell 25% on hold of 12.2% vs 13.6% in November 2011.  On a trailing twelve month average, baccarat hold was 12.0%.

SBUX: Full Speed Ahead

Currently, Starbucks (SBUX) has a few tailwinds going for it that could push the stock higher. We believe that SBUX will post another strong year for FY13 thanks to revenue drivers firing on all cylinders. According to the Street consensus, revenues are expected to grow 12.7% in FY13 versus FY12, which we think is possibly conservative given momentum in several other areas of SBUX’s business. Combined with growth in China, the expanded availability of the Evolution Fresh brand, and stronger market share in the single serve and core retail space, Starbucks looks attractive as a long right now. We think top- and bottom-line estimates will rise over the next three months.

 

 

SBUX: Full Speed Ahead - SBUXquant

 

 

From a quantitative setup, the stock is in bullish formation, with immediate-term TRADE and intermediate-term TREND support at $53.39 and $51.37, respectively. We remain long SBUX in our Real-Time Alerts.

 

 

SBUX: Full Speed Ahead - SBUXgrowth


URBN: We Liked It Lower, And We Like It Higher

Takeaway: $URBN looks expensive, but we can’t point to a catalyst to get either the multiple to contract or for earnings to slow.

URBN’s positive release this morning did not come as a great surprise to us. The company has strong momentum in both its business and its turnaround, and we think that those both have legs. The timing – ie less than a week before ICR – is a no-brainer as well.

 

It’s impossible to argue that this stock is still cheap, but the reality is that we think it is a 20% EPS grower over the next 2-years, and consensus estimates are at least 5% too low (we think that’s probably conservative). Our model assumes a sales and margin recovery, but still not even within a stone’s throw of prior peaks.  

 

Bears have often told us that there’s no way that URBN will hit prior peaks. But we never thought we needed that to support a bull call. We are assuming mid-single digit comp rates, and have EBIT margins topping out shy of 16% -- well pelow 18%-19% peaks.

 

Is the stock expensive? Yes. But looking into next year, we consider it the first real year of the company’s recovery, as we have the benefit of the new human capital put in place in 2012 as well as the new fulfillment centers to facilitate better DTC growth. Our model has earnings growing 24% in the upcoming year, which is very difficult to find in retail/consumer. That plus upside from the consensus numbers still leaves us liking URBN here.

 

Do we like it more on a pullback? Yes.  But remember that the consensus is still rather bearish on it, as evidenced by our Hedgeye Sentiment Monitor (which triangulates Buy Side, Sell Side, and Inside sentiment).  It looked expensive at $26, then at $30, then at $35 and now at $42. We can’t point to a catalyst to get either the multiple to contract or for earnings to slow. 

 

URBN: We Liked It Lower, And We Like It Higher - 1 10 2013 11 21 14 AM


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JOSHUA STEINER: JOBLESS CLAIMS: THE SIGNAL AND THE NOISE

Takeaway: Full steam ahead on the labor front.

This week's take on the labor market is shorter than usual owing to me being on the road.

 

The Signal

Labor conditions improved demonstrably this past week, in spite of what the printed number suggests. As the first chart shows, the rolling YoY NSA claims series improved to -9.8%, which is sharply better than the -6.0% and -5.9% readings over the prior two weeks. Remember that a smaller number (i.e. more negative) is better in this instance. This puts the rolling NSA series right back on track with it's longer-term average, meaning that labor conditions are continuing to improve, and at an accelerating rate versus what we saw in December.

 

The Noise

Seasonally-adjusted claims "rose" 4k to 371k after last week's print was revised from 372k to 367k. Overall, the seasonally-adjusted series continues to bounce along the 365-375k range it has occupied post Hurricane Sandy renormalization.

 

JOSHUA STEINER: JOBLESS CLAIMS: THE SIGNAL AND THE NOISE - 1

 

JOSHUA STEINER: JOBLESS CLAIMS: THE SIGNAL AND THE NOISE - 2

 

JOSHUA STEINER: JOBLESS CLAIMS: THE SIGNAL AND THE NOISE - 3

 

Joshua Steiner, CFA


January ECB Presser: Draghi’s Optimism in No Real Recovery

There wasn’t much “new” news revealed in today’s ECB press conference; however Draghi underlined the significant progress that the region has made over the last six months and even referred to a “positive contagion” that can take place.

 

In the Q&A session Draghi said that the council was unanimous in its interest rate decision (and only 5 of 55 surveyed economists expected a change):  the interest rate on the main refinancing operations was unchanged at 0.75% along with the interest rates on the marginal lending facility and the deposit facility at 1.50% and 0.00%, respectively.

 

January ECB Presser: Draghi’s Optimism in No Real Recovery - aaa. ecb rates

 

Of the economic indicators there was no great change over December’s statements. The Bank believes that CPI should moderate over the medium term and fall below 2% in 2013. GDP is expected to see a gradual recovery in late 2013, however risk remains to the downside mainly due to the slow implementation of structural reforms, geopolitical issues and imbalances in major industrialized countries. Further, GDP projections remain in line with December’s 2013 guidance of -0.9% and 0.3%.

 

You can find Draghi’s Introductory Statements here.

 

In a question related to signs of regional improvement Draghi very specifically stated the financial market improvements over the last six months:

  • Bond yields and country CDS much lower
  • Stock markets have increased
  • Volatility is at historical lows
  • Lower redemptions are now much lower
  • Strong capital inflow to the Eurozone
  • Deposits in peripheral banks are up
  • Target 2 balances are broadly down
  • The ECB balance sheet size (seen as a risk) continues to shrink

When returning to the broader economy, and not financial markets, Draghi was less positive, stating that there is really no end in sight and that the Bank had no plan to exit its non-standard measures and that regional economies still remain fragmented.

 

We too wrestle with the mismatch between the broader economy and market conditions. Below are a couple of signals we’re watching. Broader Eurozone confidence figures are flattening out to showing slight signs of improvement while ECB loans to households and non-financial corporations have yet to arrest their decline/show a meaningful inflection.

 

January ECB Presser: Draghi’s Optimism in No Real Recovery - aaa. confidence

 

January ECB Presser: Draghi’s Optimism in No Real Recovery - aaa. ecb loans

 

With respect to our view on the EUR/USD we continue to expect the cross to be range bound, especially given the OMT (bond purchasing program) that is in Draghi’s back pocket, the favorable financial market conditions exhibited since last summer, and commitment of Eurocrats to keep the union together at all costs.

 

Another bullish data point comes from the CFTC data we follow for net non-commercial positions in the EUR/USD. The latest data point (1/1/2013) turned positive for the first time since August 2011 and is confirming a strong trend-line breakout!

 

January ECB Presser: Draghi’s Optimism in No Real Recovery - aaa. cftc

 

We do not currently have a real-time position in the EUR/USD, however we’d trade the range of $1.29 to 1.31.

 

January ECB Presser: Draghi’s Optimism in No Real Recovery - aaa. eurusd

 

On balance we think that there is still much political risk in the Eurozone on the backdrop of a very slowly improving economy (#GrowthStabilizing). Fiscal consolidation is clearly a long road and we still expect the periphery to underperform as it mismanages its consolidation targets. The Italian election towards the end of February will be one key political test, as is the feedback loop between imbalances across sovereigns and banks, especially without a fiscal union in place. Stay tuned.

 

Matthew Hedrick

Senior Analyst


JOBLESS CLAIMS: THE SIGNAL AND THE NOISE

Takeaway: Full steam ahead on the labor front.

This week's take on the labor market is shorter than usual owing to me being on the road.

 

The Signal

Labor conditions improved demonstrably this past week, in spite of what the printed number suggests. As the first chart shows, the rolling YoY NSA claims series improved to -9.8%, which is sharply better than the -6.0% and -5.9% readings over the prior two weeks. Remember that a smaller number (i.e. more negative) is better in this instance. This puts the rolling NSA series right back on track with it's longer-term average, meaning that labor conditions are continuing to improve, and at an accelerating rate versus what we saw in December.

 

The Noise

Seasonally-adjusted claims "rose" 4k to 371k after last week's print was revised from 372k to 367k. Overall, the seasonally-adjusted series continues to bounce along the 365-375k range it has occupied post Hurricane Sandy renormalization.

 

JOBLESS CLAIMS: THE SIGNAL AND THE NOISE - nsa rolling yoy

 

JOBLESS CLAIMS: THE SIGNAL AND THE NOISE - sa 4 wk

 

JOBLESS CLAIMS: THE SIGNAL AND THE NOISE - sep thru feb

 

Joshua Steiner, CFA

 

 


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