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CHART DU JOUR: MACAU VIP SSS GROWTH?

VIP per table stagnant over last few years but signs of an upturn emerging

 

  • Unlike the Mass chart we posted yesterday, VIP table productivity has been nonexistent
  • However, April showed promising YoY growth.  May started strong, and we’re projecting accelerating growth for most of the rest of the year
  • Not surprisingly, the two primary Cotai operators – MPEL and LVS – trail the others on the VIP side but perform well on the Mass side

CHART DU JOUR: MACAU VIP SSS GROWTH? - mmm


Corn - Plantings Should Pick Up this Week

Corn planting progress is at a record slow pace, and while we are not yet concerned, we think it’s worth highlighting for investors at this point.  As of Sunday, 28% of the U.S. corn crop was in the ground, well below last year (85%) and the five-year average (65%).



Corn emergence is also developing as a bit of an issue as well – only 5% of the crop has emerged compared to 52% last year.  Obviously, what hasn’t been planted can’t come out of the ground, but cool temperatures have certainly kept what has been planted in the ground.



We think the weather this week has likely been constructive and should encourage an increased planting pace and make no mistake, the crop can get into the ground very quickly.  We wouldn’t be surprised to see an update indicating 40%+ of the crop in the ground, so we will be close to half the crop in the ground by the middle of May.  For some perspective, the corn crop usually reaches 50% planted during the first 7-10 days of May, so it looks like we are running about 2 weeks behind the average.



We are less concerned about planting then we are about emergence – the longer the crop takes to emerge, the greater the risk of lower yields.  However, the weather appears to be conducive to emergence and soil conditions have improved (warmed), so the pace of emergence should pick up over the next couple of weeks as well.



So, there are a few risks “emerging” here – the longer it takes the crop to get into the ground, the greater the chance that some farmers make the late May decision to switch acreage to soybeans.  The acreage risk switch isn’t that significant (maybe 1-3 million acres).  Before switching to soy, farmers can elect to switch to earlier maturing (but lower yielding) hybrids.  We should also point out that in years with planting delayed in as meaningful a fashion as it has been this year, trend line yields have suffered (see below).



Bottom line, the USDA WASDE estimate for new crop corn yield of 158 bushel per acre may be somewhat aggressive given the current conditions, but by and large we are not that concerned with yields at this point, so we are sticking with our bearish bias on corn.

 

Corn - Plantings Should Pick Up this Week - Crop Progress

 

Corn - Plantings Should Pick Up this Week - Corn Cost Curve 5.16.13

 

Corn - Plantings Should Pick Up this Week - Corn Acreage 5.16.13

 

Corn - Plantings Should Pick Up this Week - CFTC Corn1 5.16.13

 

Corn - Plantings Should Pick Up this Week - CFTC Corn2 5.16.13

 

Robert  Campagnino

Managing Director

HEDGEYE RISK MANAGEMENT, LLC

E:

P:

 

Matt Hedrick

Senior Analyst



INITIAL CLAIMS: FINALLY, A MISFIRE

Takeaway: It was starting to look like labor and housing data could do no wrong. This morning serves as a wake-up call on both fronts.

Below is the breakdown of this morning's claims data along with some sector specific strategy from our head of Financials, Josh Steiner.  If you would like to setup a call with Josh or trial his research, please contact 

 

 

Taking a Breather

This morning's headline print for initial jobless claims is clearly weak and the NSA data was weak too, on a one-week basis. This is likely to take the short-term wind out of the sails for Financials, especially when combined with the also lackluster housing starts print this morning. 

 

We have subscribed to a simple philosophy since Lehman Brothers. We consider three macro factors paramount in gauging the overall direction for the sector: labor, housing and the Fed. On that score, YTD all three factors have been moving in the right direction.We continue to view labor and housing as moving in the right direction from an intermediate and longer-term standpoint, and the Fed is unlikely to go anywhere in light of this morning's lukewarm numbers. In the short-term, however, we would expect some weakness. 

 

Contrary to the prior three years, however, where it was unclear whether the weakness constituted a falling knife or buying opportunity, this time around, we would view any weakness as a buying opportunity for those with a horizon beyond a few weeks.

 

Importantly, the rolling NSA data continues to improve YoY at a better-than-expected clip of 8.9%. While that's a sequential deceleration vs. the previous week, it's still a very good rate of improvement.  

 

The Data

Prior to revision, initial jobless claims rose 37k to 360k from 323k WoW, as the prior week's number was revised up by 5k to 328k.

 

The headline (unrevised) number shows claims were higher by 32k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 1.25k WoW to 339.25k.

 

The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -8.9% lower YoY, which is a sequential deterioration versus the previous week's YoY change of -9.0%

 

 

INITIAL CLAIMS: FINALLY, A MISFIRE - JS 1

 

INITIAL CLAIMS: FINALLY, A MISFIRE - JS 2

 

INITIAL CLAIMS: FINALLY, A MISFIRE - JS 3

 

INITIAL CLAIMS: FINALLY, A MISFIRE - JS 4

 

INITIAL CLAIMS: FINALLY, A MISFIRE - JS 5

 

INITIAL CLAIMS: FINALLY, A MISFIRE - JS 6

 

INITIAL CLAIMS: FINALLY, A MISFIRE - JS 7 

 

Joshua Steiner, CFA

 


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INITIAL CLAIMS: FINALLY, A MISFIRE

Takeaway: It was starting to look like labor and housing data could do no wrong. This morning serves as a wake-up call on both fronts.

This note was originally published May 16, 2013 at 10:09 in Financials

Taking a Breather

This morning's headline print for initial jobless claims is clearly weak and the NSA data was weak too, on a one-week basis. This is likely to take the short-term wind out of the sails for Financials, especially when combined with the also lackluster housing starts print this morning. 

 

We have subscribed to a simple philosophy since Lehman Brothers. We consider three macro factors paramount in gauging the overall direction for the sector: labor, housing and the Fed. On that score, YTD all three factors have been moving in the right direction.We continue to view labor and housing as moving in the right direction from an intermediate and longer-term standpoint, and the Fed is unlikely to go anywhere in light of this morning's lukewarm numbers. In the short-term, however, we would expect some weakness. 

 

Contrary to the prior three years, however, where it was unclear whether the weakness constituted a falling knife or buying opportunity, this time around, we would view any weakness as a buying opportunity for those with a horizon beyond a few weeks.

 

Importantly, the rolling NSA data continues to improve YoY at a better-than-expected clip of 8.9%. While that's a sequential deceleration vs. the previous week, it's still a very good rate of improvement.  

 

The Data

Prior to revision, initial jobless claims rose 37k to 360k from 323k WoW, as the prior week's number was revised up by 5k to 328k.

 

The headline (unrevised) number shows claims were higher by 32k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 1.25k WoW to 339.25k.

 

The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -8.9% lower YoY, which is a sequential deterioration versus the previous week's YoY change of -9.0%

 

INITIAL CLAIMS: FINALLY, A MISFIRE - 1

 

INITIAL CLAIMS: FINALLY, A MISFIRE - 2

 

INITIAL CLAIMS: FINALLY, A MISFIRE - 3

 

INITIAL CLAIMS: FINALLY, A MISFIRE - 4

 

INITIAL CLAIMS: FINALLY, A MISFIRE - 5

 

INITIAL CLAIMS: FINALLY, A MISFIRE - 6

 

INITIAL CLAIMS: FINALLY, A MISFIRE - 7

 

INITIAL CLAIMS: FINALLY, A MISFIRE - 8

 

INITIAL CLAIMS: FINALLY, A MISFIRE - 9

 

INITIAL CLAIMS: FINALLY, A MISFIRE - 10

 

INITIAL CLAIMS: FINALLY, A MISFIRE - 11

 

INITIAL CLAIMS: FINALLY, A MISFIRE - 12

 

INITIAL CLAIMS: FINALLY, A MISFIRE - 13

 

INITIAL CLAIMS: FINALLY, A MISFIRE - 14

 

Yield Spreads

The 2-10 spread rose 14.5 basis points WoW to 170 bps. 2Q13TD, the 2-10 spread is averaging 153 bps, which is lower by -14 bps relative to 1Q13.

 

INITIAL CLAIMS: FINALLY, A MISFIRE - 15

 

INITIAL CLAIMS: FINALLY, A MISFIRE - 16

 

 

Joshua Steiner, CFA

203-562-6500

jsteiner@hedgeye.com

 


Healthcare: Consensus Too Bearish?

Takeaway: Improving fundamentals and depressed expectations is leading to a bullish set-up in Healthcare stocks.

This is an excerpt of a note that was originally published May 16, 2013 at 09:44 in Healthcare

 

 

We had been vocal about our expectations for weakness in 1Q13, which was evidenced by the majority of companies in our Healthcare index missing 1Q13 consensus revenue estimates, and also the most annual revenue guidance cuts occurring in the first quarter in the last 5 years.

 

However, we’ve also been suggesting an improving fundamental setup moving forward; mainly due to the utilization drivers listed below, but also because the externality setup (weather/working days) reverses from a headwind in 1Q13 to tailwind for the remainder of the year; particularly in 2Q13 (see link below for more detail).  These utilization drivers are coming up against consensus estimates/management guidance that have generally declined following a tough 1Q13 earnings season.

 

That combination of improving fundamentals against depressed expectations makes us incrementally more bullish heading into 2Q13 earnings season. 

 

 

2013 Utilization Drivers

  1. Physician Utilization
  2. Maternity
  3. Deferred Care
  4. Externality Tailwinds 

 


JACK HITS A SPEED BUMP

Per our most recent post on JACK, describing the upside opportunity in the stock over the next two-and-a-half years, Qdoba is the key component of the long-term story. In fact, we saw no near-term upside from a fundamental perspective as the stock has outperformed the S&P 500 by 18% year-to-date. With Qdoba failing to inspire confidence following 2QFY13 earnings, we believe the upside will take time to materialize. We would advise taking a step back from JACK at these levels.

 

 

Discipline Warranted

 

While JACK reported an in-line quarter, management raising FY EPS guidance was a bright spot for shareholders. However, on aggregate, the quarter was disappointing as the continuing soft performance of Qdoba, underscored by negatively revised unit growth and comp guidance, was the most important takeaway.  With respect to many of the tenets of our long thesis, (valuation, fundamentals, sentiment), we believe that the investment community consensus has caught up with reality. Our confidence in Qdoba’s ability to drive an additional 30-40% in upside has diminished significantly following last night’s earnings release.

 

With this in mind, we are stepping away from our bullish call on the stock (initiated February 2012). That said, we don’t see much downside in the stock as the core Jack in the Box concept continues to perform strongly.

 

 

Solid Quarter But Qdoba Outlook Weak

 

Over the past year, the valuation gap between JACK and its QSR peers has narrowed significantly. While the stock still trades at a discount, we believe further margin expansion at JACK will come from incremental execution – particularly at Qdoba.

 

The company reported operating EPS of $0.33 versus expectations of $0.31.  Same-restaurant sales at Jack in the Box grew 0.9% at company-owned stores. Qdoba comps came in at -2% versus consensus of -1.4%. Management raised guidance slightly to EPS of $1.55-1.65 vs prior guidance $1.48-1.63 and consensus of $1.61.  In addition, management reiterated Jack in the Box same-store sales of +1.5-2.5% and lowered Qdoba  same-store sales to between flat to +1.0% vs prior guidance +1.0-2.0%.

 

The crux of our now-cautious view on Qdoba is that the company had to heavily discount to get to -2% comps.  While, adjusting for weather, the print was within the guided range, the 340 basis point margin decline was a negative indicator of the sustainability of current trends.  

 

 

Howard Penney

Managing Director

 

Rory Green

Senior Analyst


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The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

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