prev

CASUAL DINING: LOOKING GOOD

Takeaway: Strong price action in the casual dining stocks is being confirmed by sequentially stronger Blackbox Intelligence Data.

This note was originally published June 05, 2013 at 08:42 in Restaurants

Strong price action in the casual dining stocks is being confirmed by sequentially stronger Blackbox Intelligence Data. Blackbox Intelligence Data for May is giving us added confidence in our casual dining longs. 

  • Casual dining stock have outperformed the S&P 500 by 16% YTD
  • Casual dining sales continue to recover in May.  Blackbox reported May same-store sales trends of 0.8%, an improvement of 40bps sequentially. 
  • Traffic declined 1.6% in May versus 1.7% in June
  • 2Q sales appear to be on track to meet consensus expectation.  Consensus expectations are for the 15 publicly traded companies we track to report 2.8% same store sales in 2Q13 versus 0.8% in 1Q13.  The average spread between reported same-store sales SSS and the Blackbox reported numbers over the last 5 quarters has been 200 bps.  The current spread is 220bps, with one month left in the quarter.
  • Our favorite names in casual dining are EAT, DRI and CAKE

CASUAL DINING: LOOKING GOOD - blackbox SRS

 

CASUAL DINING: LOOKING GOOD - Blackbox SRT

 

 

Howard Penney

Managing Director

HPenney@hedgeye.com

 

 

Rory Green

Analyst

RGreen@hedgeye.com


Morning Reads From Our Research Team

Takeaway: A quick look at some articles on the Hedgeye radar screen.

Josh Steiner – Financials

HSBC Sued by New York Over Alleged Foreclosure Violations (via Bloomberg)

AIG argues against $8.5 billion settlement with BofA (via Reuters)

 

Keith McCullough – CEO

Japan's Abe targets income gains in growth strategy (via Reuters)

Asian Stocks Fall as Japan Reverses Gain After Abe Speech (via Bloomberg)

Turkey protests resume in Istanbul after apology (via BBC)

 

Howard Penney – Restaurants

Domino's Uses a Drone to Deliver a Pizza (via Mashable)

 

Jonathan Casteleyn - Financials

Top 100 Most Valuable Global Brands 2013 (via millwardbrown.com)

 

Matt Hedrick – Macro

Latvia’s Euro Path Shows Allure of Crisis-Hit Currency, for Some (via Bloomberg)

 

Morning Reads From Our Research Team - reading


MAY IN MACAU - DETAIL LOOKS EVEN BETTER

As you already know, May was a strong month in Macau with GGR up 13.5% YoY.  What you may not know is that hold was actually 8bps below normal (including Direct VIP) accounting for a 3.0% drag on growth.  MPEL, LVS, and MGM were the standouts.  Here are some market and concessionaire observations:

 

MARKET

  • YoY growth would’ve been 16.5% assuming trailing 12-month VIP hold of 3.0%
  • VIP volume posted a 3rd straight above trend (trailing 3 month avg) performance
  • Mass grew 33% YoY, its best performance in over a year

LVS

  • Overall looks better than the market share print
  • GGR growth led the market despite well below normal VIP hold
  • VIP volume share was well above trend
  • Mass grew above trend, pushing market share to within 10bps of April’s all-time high

MPEL

  • Very low hold impacted results yet market share of 14% was above recent trend and YoY GGR growth of 30% trailed only LVS
  • Mass revenue increased a whopping (yes I like that word) 63% YoY and pushed Mass market share to an all-time record
  •  VIP volume share was in-line with recent trend

MGM

  • This property continues to impress us
  • VIP hold was above normal and MGM generated its 2nd highest level of growth since Feb 2012 and 3rd highest in the market
  • Mass share grew sequentially and was above trend

WYNN

  • Was one of 2 concessionaires to hold above normal in May
  • Mass growth was below recent trend
  • VIP volume barely grew in May but was the first month of YoY growth since November 2012

GALAXY

  • VIP hold was normal
  • Pretty much an in-line month across the board for Galaxy 

SJM

  • VIP hold was well below normal contributing to a 12% YoY drop in GGR
  • Mass market was only flat YoY and VIP volume actually declined
  • Market share fell to its lowest level ever

MAY IN MACAU - DETAIL LOOKS EVEN BETTER - d1

 

MAY IN MACAU - DETAIL LOOKS EVEN BETTER - g2

 

MAY IN MACAU - DETAIL LOOKS EVEN BETTER - g3


get free cartoon of the day!

Start receiving Hedgeye's Cartoon of the Day, an exclusive and humourous take on the market and the economy, delivered every morning to your inbox

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.

ECB on Hold Tomorrow

Takeaway: Draghi will monitor last month's cut and further assess non-standard measures to spur growth.

This note was originally published June 04, 2013 at 11:32 in Macro

Continuing with our call, we believe that Mario Draghi and the ECB will keep rates unchanged this Thursday after making a big splash cutting the main interest rate by 25bps (to +0.50%) last month.

 

ECB on Hold Tomorrow - ECB

 

Here’s how we’re sizing up our positioning:

  • Draghi has signaled that he expects a gradual recovery in growth in the back half of 2013, and therefore is monitoring the impact of the May 2nd interest rate cut and the current high-frequency data
  • Manufacturing PMIs were better in MAY vs APR (48.3 vs 46.7)
  • May Eurozone Confidence figures (Economic, Consumer, Business, Services, Industrial) all improved month-over-month
  • Sovereign yields remain largely anchored and the majority of European equity markets are positive YTD
  • The ECB needs more time to consider non-standard measures to encourage growth, including initial hints at 1.) Increased lending to small and medium-sized enterprises (SMEs) and 2.) Cutting the deposit rate to negative
  • On SME funding, it’s not clear the channel by which the funding would be carried out, ie from top-down coordination (Brussels/ECB) or bottom-up (at the individual CB/State Government level)
  • On a negative deposit rate, there is mixed discussion about the merits and benefits of such a move. Denmark provides one example of this and its government has claimed that it had no impact in boosting lending, and could negatively distort the property market. The jury is still clearly out on this option
  • Consensus is baking in no change to rates: 41 of 42 economists polled by Bloomberg agree

ECB on Hold Tomorrow - yy. rates

 

Our critical TAIL line of resistance on the EUR/USD at $1.31 has not changed over recent months. We’ll be monitoring this level closely into and out of Thursday’s ECB meeting. Our immediate term TRADE range is outlined in the chart below. (The cross can be traded via the etf FXE).

 

ECB on Hold Tomorrow - yy. eur usd

 

Matthew Hedrick

Senior Analyst


2Q13 CASUAL DINING RECOVERY

Strong price action in the casual dining stocks is being confirmed by sequentially stronger Blackbox Intelligence Data. Blackbox Intelligence Data for May is giving us added confidence in our casual dining longs. 

  • Casual dining stock have outperformed the S&P 500 by 16% YTD
  • Casual dining sales continue to recover in May.  Blackbox reported May same-store sales trends of 0.8%, an improvement of 40bps sequentially. 
  • Traffic declined 1.6% in May versus 1.7% in June
  • 2Q sales appear to be on track to meet consensus expectation.  Consensus expectations are for the 15 publicly traded companies we track to report 2.8% same store sales in 2Q13 versus 0.8% in 1Q13.  The average spread between reported same-store sales SSS and the Blackbox reported numbers over the last 5 quarters has been 200 bps.  The current spread is 220bps, with one month left in the quarter.
  • Our favorite names in casual dining are EAT, DRI and CAKE

2Q13 CASUAL DINING RECOVERY - blackbox SRS

 

2Q13 CASUAL DINING RECOVERY - Blackbox SRT

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst


Volatility Breeds Contempt

Client Talking Points

JAPAN

The implied volatility in both Japanese stocks and bonds is ripping now. Volatility breeds contempt. The Weimar Nikkei was hit hard overnight, down over -3% on what was supposed to be a burning currency speech by Prime Minister Shinzo Abe. Instead, the Yen (vs USD) holds it’s immediate-term TRADE overbought gains, despite 10yr JGBs holding above our TAIL risk line of 0.81% (0.85% last).

UK

1.     Don’t blame me for highlighting more surprisingly bullish #GrowthAccelerating in another country’s economic data. The last week of data out of the British has been bullish. Following up on a solid Construction PMI print of 50.4 yesterday, UK Services PMI accelerated to 54.9 in May (vs 52.9 APR). On the other hand, France’s Services economy still stinks (44.3 in May vs the UK’s 54.9). Policy has consequences.

GOLD

No, gold doesn’t like US Housing and Employment #GrowthAccelerating. We re-shorted the precious metal yesterday ahead of Friday's employment report where, not surprisingly, expectations remain relatively bearish. Gold is broken on all 3 of our core risk management durations after failing at immediate-term TRADE resistance of $1424/oz.

 

Asset Allocation

CASH 24% US EQUITIES 30%
INTL EQUITIES 18% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 28%

Top Long Ideas

Company Ticker Sector Duration
IGT

Decent earnings visibility, stabilized market share, and aggressive share repurchases should keep a floor on the stock.  Near-term earnings, potentially big orders from Oregon and South Dakota, and news of proliferating gaming domestically could provide near term catalysts for a stock that trades at only 11x EPS.  We believe that multiple is unsustainably low – and management likely agrees given the buyback – for a company with the balance sheet and strong cash flow as IGT.  Given private equity’s interest in WMS (they lost out to SGMS) – a company similar to IGT that unlike IGT generates little free cash – we wouldn’t rule out a privatizing transaction to realize the inherent value in this company.  

WWW

WWW is one of the best managed and most consistent companies in retail. We’re rarely fans of acquisitions, but the recent addition of Sperry, Saucony, Keds and Stride Rite (known as PLG) gives WWW a multi-year platform from which to grow.

FDX

With FedEx Express margins at a 30+ year low and 4-7 percentage points behind competitors, the opportunity for effective cost reductions appears significant. FedEx Ground is using its structural advantages to take market share from UPS. FDX competes in a highly consolidated industry with rational pricing. Both the Ground and Express divisions could be separately worth more than FDX’s current market value, in our view.

Three for the Road

TWEET OF THE DAY

@KeithMcCullough been with you on real time alerts just now getting into twitter, you have made more money this year than any broker I had

@cvevan1

QUOTE OF THE DAY

"Wherever you see a successful business, someone once made a courageous decision." - Peter Drucker

STAT OF THE DAY

A 12-piece bucket of KFC chicken bought for $11.50 in Egypt and smuggled into Gaza City costs $27.


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

next