• run with the bulls

    get your first month

    of hedgeye free



We didn't expect much to come out of this call but as always, management is optimistic on yield outlook, particularly in Europe. We just wish it was reflected in the yield guidance. 




  • Arnold will be CEO in early July
  • Micky will remain Chairman for the foreseeable future
  • Timing of SG&A 
  • 2Q:
    • Capacity increased 1%
    • EAA yield : +4.6%, driven by AIDA, COSTA
    • NA yield: -1%, more dry docks days YoY
    • Net ticket yields: -2.7%
      • EAA brands down 3.8%, declines in Northern Europe offset by increases in Costa and P&O Australia 
    • NA brands down 1.8% driven by promotional discounting at Carnival brand
    • Net onboard and yields: +0.5%
    • Lower fuel prices saved the company 8 cents
  • zero collar fuel hedges: 40% consumption hedged ; 25% in 2017
  • 25 cent dividend to continue
  • CFO guidance of $2.7 bn
  • Net capital investment: $2.1 bn
  • 2H 2013: certain brands expect to increase promotional spending
  • Ex Carnival bookings last 11 wks:
    • NA & EAA: higher YoY at higher prices
  • NA brand
    • Carnival bookings/pricing last 11 wks: lower in the high single digits and low double digits YoY, respectively
      • Over last 6 wks, gradual improvement in volumes and prices
    • Caribbean volumes last 11 wks (ex Carnival): slightly lower YOY at slightly higher prices
    • Alaska bookings (ex Carnival):  signifcantly higher at lower prices
    • European bookings slighlty lower at nicely higher prices
  • EAA brand last 11 wks
    • Caribbean bookings running behind last year but at nicely higher prices
  • 3Q (ex Carnival)
    • Fleetwide bookings: slightly behind at slightly lower prices
    • NA bookings: slightly behind at flat prices
      • Alaska pricing behind
      • European pricing higher
    • EAA bookings: occu slightly behind at lower prices
      • Asia/Australia: bookings nicely higher at slightly higher prices
        • Costa in China particularly strong
    • Ex Carnival, 3Q revenue yields -1.5-2.5%
  • 4Q (ex Carnival)
    • NA bookings: occu slightly lower at slightly lower prices
    • Carnival brand: occu lower at slightly higher prices
    • EAA bookings: occu flat at lower prices
    • Costa occu nicely higher; expect Costa to deliver nice yields in 4Q
  • 1Q (incl Carnival)
    • occu lower at higher prices
    • NA occu lower at nicely higher prices
    • EAA occu lower at slightly higher prices
  • Expect nice yield at Costa in 4Q
  • 1Q 2014 EAA brands bookings lower at slightly higher prices
  • Carnival brand
    • 2013 Forecast YoY profit decline is estimated have a 50% per share on the company's YoY results. Of this, approximately $.27 is primarily due to rent lower revenue euros, $.16 results from our failings and repair costs related to the Carnival triumph Triumph refurbishments, increase in Carnival's and higher plan marketing spend in the second half of the year for Carnival Cruise Lines amounted to seven cents a share, and that builds to the $.50 to cleaning declining year-over-year results.
    • Recovery will be gradual - will take 2-3 years
  • Costa will return to profitability in 2013
    • Italian market (largest market) has significantly improved
    • Recent bookings volume strong
    • Expect higher yields in 3Q and 4Q
  • Believes worst is over  
  • Full rollout of scrubber technology in 2014
  • New ships will be far more fuel efficient



  • CCL consultants say it will take 3 years to regain its brand perception
  • Some of the repair cost will be in 3Q
  • Vessel enhancement costs in 2013: 6-7 cents
    • Some vessel enhancement costs in 2014
  • Will begin putting scrubbers on tomorrow's ships later in 2013
  • Believe they can mitigate a substantial portion of the worst-case $265MM additional costs from the change in sulfur requirements
  • Expects Carnival brand yield improvement in 2H 2014
  • 4Q will be a little better than 3Q as they continue to see improvement in Europe
  • 3Q and 4Q yield will be mostly driven by pricing
  • Higher promotional spend 2H 2013: A lot of it is going to be focused on travel agents and travel agent swap marketing, more trade advertising. A lot of it is social media and web-based marketing and TV-based. 
  • A little puzzled by Europe strengthening recently
  • When CCL went through the guidance in December, they had indicated that they expected northern European brands to be down, and expect Costa to get back about half the yield previously lost. As the months and weeks passed, Europe was worse than expected and CCL brought down yield guidance in both northern Europe and for Costa. Costa is only expected get back a quarter of what it previously lost. Even though northern European brands, the yield is still going lower, the yields at P&O cruises and AIDA are doing incredibly well. So it's a directional change in reduction.
  • Vessel enhancements: 2H 2013, 2014 and 2015
  • Carnival brand:  they haven't done anything to reduce prices since prices been reintroduced.
  • FY 2013 yield guidance: NA will be slightly more than the -2-3%; Europe slightly less; premium/luxury brands in NA is flat
    • Ex Carnival, rest of NA brand pricing would have to be flat to reach upper end of guidance
  • Europe, essentially what they've seen in the last 11 weeks is an uptick in European bookings and pricing across substantially all brands but since the last guidance color (5-6 wks ago), nothing has changed

Hedgeye Morning Call Q&A

Hedgeye CEO Keith McCullough offers his latest thoughts on the liquidity brouhaha in Beijing. Specifically, just how bad is the situation in China and do people fully appreciate it?


Morning Reads on Our Radar Screen

Takeaway: A quick look at top stories on Hedge's radar screen.

Keith McCullough – CEO

Blackhawks' late goals stun Bruins to win Stanley Cup (via NHL.com)

Two Fed Presidents Emphasize Stimulus to Persist After QE Taper (via Bloomberg … KM note: Get out of our lives already)


Morning Reads on Our Radar Screen - earth


Josh Steiner – Financials

Bankrate US Home Mortgage 30 Year Fixed National Avg pops up to 4.51% (up another 15 bps overnight) (via Bloomberg)

Corzine facing civil charges on MF Global collapse (via Marketwatch JS note: Corzine finally facing (a little) justice. #ItsAboutTime)

Wall Street’s $8 Billion CMBS in Limbo as Bulls Retreat (via Bloomberg)


Daryl Jones – Macro

Credit Warnings Offer World a Peek Into China’s Secretive Banks (via New York Times)


Brian McGough – Retail

Neiman Marcus Files for IPO (via WWD)


Kevin Kaiser – Energy

Apollo's EP Energy looking at IPO – sources (via Reuters)


Howard Penney – Restaurants

Restaurant Franchises Are Hiring. Are They Dodging Obamacare? (via Businessweek)

McDonald's To Stop Serving Halal Food At 2 Michigan Restaurants (via HuffPost)


Jonathan Casteleyn – Financials

U.S. FTC Said to Open Probe of Oil Price-Fixing After EU (via Bloomberg)

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It was inevitable so what do we do now?



As we speculated in our Macau note yesterday, a sell side firm would likely make a negative call based on the China credit situation.  Indeed, the Deutsche Bank analyst pulled the plug on a number of Macau stocks today.  We don’t disagree with the call from a Trend (intermediate) perspective, but we think the downgrade could push the stocks into buy territory over the Trade duration.


Our call yesterday was to wait for the inevitable downgrade and look to buy on that weakness.  The fact that the downgrade came from an influential analyst creates an even better opportunity. 


We like the short-term Trade here and are still bullish on the long-term Tail.  We share DB’s concerns over the Trend intermediate term.  As we wrote about in our 05/22/11 note “A VIP SLOWDOWN IN THE CARDS?”, we’ve found that China central bank moves impact the Macau junket market on a 2-3 quarter lag.  VIP is likely to be under pressure later this year.


However, over the near-term, we think the setup is positive as July could be a 20%+ growth month in Macau to go along with June’s high teens growth.  We like MPEL and MGM on today’s likely weakness.  MPEL looks to post another beat for Q2.  MGM Macau’s performance has been surprisingly strong and MGM could also benefit from terrific May Strip revenues which we expect to be reported in two weeks (see our note yesterday “MONSTER MAY”).   

Talk Is Cheap

Client Talking Points


Down hard, then rumor, then bounce ... It looks like a "Bernanke/Draghi" type playbook in Beijing as the entire world attempts to watch what we cannot see. The Shanghai Composite closes down -0.2% overnight. #Oversold, but still crashing. Looks like hell down -19.5% since Feb 5. Bouncing on rhetoric doesn’t solve the long-term issue.


Doing the dead cat bounce thing within a developing bearish TREND across all of European Equities. I learn the most during the bounces. This bounce in European Equities hasn’t seen one - not one-  major index recapture any of my intermediate-term TREND lines. The FTSE gained +0.8% to 6075, but it's still well below 6398 TREND resistance. DAX TREND line = 8014.


A bear market "bounce" in gold of just +0.14%. Guess what? That is not going to get anyone excited about Gold. Nor will a 10-yr UST Yield of 2.5%. Nor will a US Dollar recapturing $81.21 TREND support. Gold is turning into a good proxy for deflation – deflating Bernanke Bubbles, that is...

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

Financials sector head Josh Steiner is the Street’s head bull on residential mortgage originator/servicer Nationstar, projecting $9 in earnings for the company in 2014.  This is well above the company’s own guidance range, which tops out at around $7.50. NSM had a successful start to the year as it won servicing bids on substantial mortgage portfolios.  They also reported significant increases in their profit margins on those portfolios, and double-digit increases in their own originations.  Housing prices are ramping significantly higher, as Steiner predicted, as demand continues to exceed supply in both new and existing homes.  Steiner says this quality mortgage company could ride the crest of a sustained wave of sector improvement.


Gaming, Leisure & Lodging sector head Todd Jordan says Melco International Entertainment stands to benefit from a major new European casino rollout.  An MPEL controlling entity, Melco International Development, is eyeing participation in a US$1 billion gaming project in Barcelona.  The new project, to be called “BCN World,” will start with a single resort with 1,100 hotel beds, a casino, and a theater.  Longer term, the objective is for BCN World to have six resorts.  The first property is scheduled to open for business in 2016. 


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. We think that the prevailing bearish view is very backward looking and leaves out a big piece of the WWW story, which is that integration of these brands into the WWW portfolio will allow the former PLG group to achieve what it could not under its former owner (most notably – international growth, and leverage a more diverse selling infrastructure in the US). Furthermore it will grow without needing to add the capital we’d otherwise expect as a stand-alone company – especially given WWW’s consolidation from four divisions into three -- which improves asset turns and financial returns.

Three for the Road


We've had a 0% asset allocation to Fixed Income recommended to clients for almost 6 months



"I am a man of fixed and unbending principles, the first of which is to be flexible at all times."

- Everett Dirksen


Looking for a mortgage? Bankrate US Home Mortgage 30-Year Fixed National Average pops up to 4.51%. That's up another 15 basis points overnight. (Bloomberg)


TODAY’S S&P 500 SET-UP – June 25, 2013

As we look at today's setup for the S&P 500, the range is 26 points or 0.45% downside to 1566 and 1.20% upside to 1592.          










  • YIELD CURVE: 2.13 from 2.15
  • VIX closed at 20.11 1 day percent change of 6.40%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7:45am: ICSC weekly sales
  • 8:30am: Dur Goods Orders, May, est. 3.0% (prior rev to 3.5%)
  • 8:30am: Durables Ex Transportation, May, est. 0.0%
  • 8:30am: Cap Goods Orders Non-Def, Ex-Aircraft, May, est. 0.5%
  • 8:55am: Johnson/Redbook weekly sales
  • 9am: S&P/Case Shiller 20 City M/m, April, est. 1.2%
  • 9am: S&P/CS Home Price Index, April (prior 148.65)
  • 9am: FHFA House Price Index, April, est. 1.1% (prior 1.3%)
  • 10am: Richmond Fed Manufacturing, June, est. 1 (prior -2)
  • 10am: Conference Bd Cons Conf, June, est. 75 (prior 76.2)
  • 10am: New Home Sales, May, est. 460k (prior 454k)
  • 10am: New Home Sales M/m, May, est. 1.3% (prior 2.3%)
  • 11am: Fed to buy $1.25b-$1.75b debt in 2036-2043 sector
  • 11:30am: U.S. to sell $25b 52W bills, 4W bills
  • 1pm: U.S. to sell $35b 2Y notes
  • 4:30pm: API weekly inventory data


    • President Obama unveils his plan to address climate change
    • Supreme court may rule at 10am on cases including:
    • Calif. initiative banning same-sex marriage, law denying federal benefits to legally married gay couples
    • Whether Voting Rights Act can require some states to get “preclearance” from federal government before changing voting rules
    • Markey takes on Gomez in Mass. special election for U.S. Senate
    • Sperling, Krueger, Biden speak on federal minimum wage
    • Senate Appropriations Cmte panel marks up FY2014 Energy and Water Development Appropriations Bill, 10am
    • Senate Energy and Natural Resources Cmte holds hearing on management of forests on federal lands, 10am
    • Senate Appropriations Cmte Financial Svcs and General Government panel hears from CFTC Chairman Gary Gensler, SEC Chairman Mary Jo White on FY2014 budget, 3pm
    • Senate Banking, Housing and Urban Affairs Cmte holds hearing on regulation of private student loans, 10am


  • Google may get win in case over privacy data on other websites
  • U.S. senators to introduce bill to end Fannie Mae, Freddie Mac
  • China money-market rate increase temporary, PBOC official says
  • Benchmark rate alternatives to be studied by regulators: Carney
  • U.S. said to explore possible Chinese role in Snowden leaks
  • Men’s Wearhouse founder Zimmer said studying options: Reuters
  • S&P mortgage ratings trial sought for Feb. 2015 by U.S.
  • Ford F-150 tops Toyota Camry as No. 1 in American-made ranking
  • Cerberus plan to boost Seibu control rejected by investors
  • Spain sells EU3.07b bills vs EU3b maximum target


    • Lennar (LEN) 6am, $0.33, preview
    • Walgreen (WAG) 7:30am, $0.91
    • Barnes & Noble (BKS) 8:30am, ($0.90)
    • Carnival (CCL) 9:15am, $0.07
    • Synnex (SNX) 4pm, $0.81
    • Apollo Group (APOL) 4:01pm, $0.86
    • Smith & Wesson (SWHC) 4:05pm, $0.43


  • HKEx’s Li Targets Chinese Growth After $2.2 Billion LME Purchase
  • Palm Reserves Rising Most Since 1999 After Oil Rout: Commodities
  • Morgan Stanley to Goldman Cut Gold Forecasts on Fed Outlook
  • Copper Advances in New York After China Comments on Money Rates
  • EU Officials Said to Agree to 30% Cap on Some Farm Subsidy Cuts
  • Corzine May Soon Face CFTC Lawsuit Over MF Global, NYT Reports
  • Morgan Stanley Maintains 3Q, 4Q Iron Ore Price Estimates
  • Iron-Ore Cargoes Double Ship Rates as China Seen Buying: Freight
  • WTI Rises a Second Day on Supply Data; Goldman Sees Demand Gain
  • Crude Supply Drops in Survey Amid Driving Season: Energy Markets
  • Yingluck Risks Farmer Ire to Curb Fiscal Burden: Southeast Asia
  • Corn Belt ’Good or Excellent’ Corn Hits Seven-year High, Week 25
  • Gold’s Price Slide Seen by Credit Suisse ‘Shattering’ Confidence
  • Russia, Kazakhstan Join Turkey in Raising Gold Holdings in May






















The Hedgeye Macro Team











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.