With a slew of earnings results this week, we are about to enter the meat of consumer staples EPS results. As a rule, we don’t do previews/reviews, but we do have an abiding interest in making people money, so we offer the following quick views on how we would be positioned into and following this week’s EPS results. Most of these comments represent shorter duration ideas or simply an indication that we don’t see anything to do in the short-term.
BNNY – 1/30 – Wouldn’t do anything into earnings with the pizza recall muddying the waters, but any significant, incremental weakness would represent an opportunity on the long side.
CL – 1/31 – at 18.7x ’13 earnings and guidance in the rear-view mirror, hard to see how you get hurt being short here. We are modeling an EPS result that is at consensus ($1.40), with a modest sequential deceleration in constant currency organic growth.
MJN – 1/31 – We defer to our more detailed prior work, but a quick review is that we expect a result that is below consensus, but we would be buyers lower (low $60s) assuming no new issues.
HSY – 1/31 – 21.4x ’13 EPS, but very good business momentum, we think the name finds buyers on any potential weakness post earnings. We wouldn’t be doing anything into the print.
ENR – 1/31 – Miss on top line, better than consensus EPS, trades at 12.8x ’13 – do nothing.
MO – 1/31 – 14.4x next year, and we can abide by a short position higher, so we would take in a small short position. We are modeling a penny below consensus for the quarter, right around consensus for 2013.
HSH – 1/31 – We are modeling $0.03 above consensus ($0.50 vs. $0.47). We don’t love the multiple here (19.2x ’13), but this quarter shouldn’t offer a reason to sell a name that we see as a likely takeout candidate.
NWL – 2/1 – We are right at consensus of $0.42 for the quarter, but $0.06 ahead for 2013. It’s a stealth housing play that still trades at only 12.7x ’13. We would be long into the print, as it can be defended lower.
BEAM – 2/1 – We are $0.02 ahead of consensus for the quarter; the multiple keeps us on the sidelines on the long side and business momentum keeps us from being short. We don't do shorts just because a name is expensive.
TSN – 2/1 – Recent upgrades (including one this morning) make us uneasy into the print and the valuation against a “normalized” EPS base that the company never seems to earn is getting full. Watch and wait (and hopefully learn). We are modeling an above consensus result ($0.04), but prefer to take a beer frame for the event.
Our preferred shorts remain TAP, KMB, PM and either GIS or CPB in packaged food. We are sticking with our preferred longs:
- STZ - event stock with near-term catalyst
- CAG - valuation remains compelling
- PG - positive bias to EPS estimates (versus KMB short)
- ADM - most compelling way to play new crop year (though no clear view on upcoming EPS)
Call with questions.
HEDGEYE RISK MANAGEMENT, LLC