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Reminder: Conference Call Today at 11am EST: Are Energy Drinks Harmful?

Today at 11:00am EDT we will be hosting an expert conference call titled "Are Energy Drinks Harmful?  A Debate with Dr. Deborah Kennedy".  

 

On the call we will host a lively debate with Dr. Deborah Kennedy about energy drinks and what may be looming for energy drink producers in the future.  A live Q&A session will be held directly after the call for all listeners. 

 

Dialing Instructions

  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 835129#

Materials:http://docs.hedgeye.com/EnergyDrinkCall.Kennedy_09.11.13.pdf

 

 

TOPICS WILL INCLUDE

  • What's the science behind caffeine consumption?
  • Where does the medical community stand on energy drinks and caffeine in foods?
  • What legal action has been taken against energy drink makers?
  • How have energy drinks been regulated and what could the future hold?

 

ABOUT DR. DEBORAH KENNEDY

 

Dr. "Deb" is the founder of Build Healthy Kids and has been at the forefront of nutritional studies and consumer awareness for almost two decades. Her experience ranges from pediatric nutrition and nutritional oncology to product development and kids' education programs.

 

Dr. Deb made national headlines from a March 2013 Build Healthy Kids newsletter in which she warned her subscribers that energy drinks can be dangerous, and told kids to "Never drink energy drinks: They can harm you" (alongside a cartoon skull 'n" crossbones and a generic energy drink can). Monster (MNST) took issue with Dr. Deb's language, and demanded that she retract the "defamatory statements" and correct them or else Monster would draw a legal suit. Following the action, she gained the support of Senator Richard Blumenthal (alongside Senator Richard Durbin and Congressman Edward Markey), who addressed Monster CEO Rodney Sacks in a letter stating that it's unclear why Monster would single out Build Healthy Kids since the company was never named and considering that Monster does not target the Build Healthy Kids demographic. To date, there is no formal legal suit against Dr. Deb or Build Healthy Kids.    

 

Dr. Deb has worked at Yale, Columbia, Tufts and Cornell University. She is a coauthor of Beat Sugar Addiction Now! for Kids and author of Nutrition Bites. She is currently working on her third book which deals with children's eating personalities. 


RH: $8.00 in 2018?

Takeaway: People are asking the wrong questions about RH. THE key question is when it will earn $8.00 per share. We think the answer is 2018.

Conclusion: People are asking the wrong questions about RH. THE key question is when it will earn $8.00 per share. We think the answer is 2018.

 

 

It was absolutely painful listening to analysts grilling management on the RH Q&A wanting to be spoonfed precise guidance in the coming quarters. We love math as much as anyone – probably more. But seriously…this is a company that should earn about $1.50 per share this year, and people are asking for guidance on items that account for maybe a nickel a share?  Here’s a better question… How long will it take for RH to earn $8.00?

 

Our current math suggests that we’ll see that number around 2018. That’s $6.50 in incremental earnings in 5-years. Put a different way, that’s a 40% earnings CAGR. Use that as ammo next time anyone tells you that RH is too expensive or that ‘they already missed it’. If you want to use a simple PEG on today’s 12-month forward earnings, you’re looking at a $90 stock within 1-year based on our model. 2-years is $125, 3-years is $175. You get the idea… If you want to review the detailed modeling assumptions, join us for our Best Ideas call on RH in 2-weeks. (We did one at the IPO at $32, and while the stock has worked, we think that the thesis has evolved to an even greater unrealized degree.)

 

Now…here are a couple of puts and takes on the quarter.

1)      The print itself was solid. Right in line with our model with adjusted EPS coming in at $0.49 vs the Street at $0.42.

 

2)      Revenue was in-line with our above-consensus estimate, but the composition was off. RH comped 26%, which was well-below our expectation of near 40% and the consensus of 29%. But the RH Direct business (not in the comp) came in meaningfully higher, accounting for 47% of total sales. They washed each other out. But people will always want to see the comp higher. I guess it just sounds better. This ordinarily wouldn’t matter – but with a 9.4% run in the stock 10-days leading into the quarter – the company really needs perfection to keep the treadmill going. 26% is sub-perfect.

 

3)      On the flip side of that, RH guided up 3Q revenue by nearly 7% -- setting expectations for higher comps (high 30s). No one is upping revenue guidance in the consumer space these days. The confidence management has in its business is extreme.

 

4)      RH eliminated the Fall Source Book – the 8 pound catalogue package that your mailman hates delivering. We give the company all the credit in the world given the sheer costs associated with the mailers and limited economic benefit. The marketing dollars will be spent with more experiential forms of advertising.

 

5)      Combining the higher comp expectation for 3Q with the cost saves from the elimination of the mailer, RH raised EPS guidance to $0.27-$0.29 vs. the Street at $0.16. Again, a huge delta in guidance change.

 

6)      RH appears to be on a track of Gross Margin recovery. After weakness in 1H, 3Q GM should be closer to flat, with full recovery by 4Q.  

 

All in, the reported numbers were excellent. The cadence of strategic change to achieve the long-term earnings growth we’re looking for was there. The revenue composition combined with investors badgering management about guidance to a greater degree than usual is not going to help the stock. But we’re talking a very short window. 2H square footage is accelerating, comp is improving, and gross margins are on the rebound. And all of this is in the context of what we think is an extremely favorable 5-year growth trajectory. 

 

RH: $8.00 in 2018? - rhrhrhrhrhr


MCD: Still Not Lovin' It

Takeaway: Global sales surprise, but U.S. sales disappoint. We remain bearish on MCD.

This note was originally published September 10, 2013 at 13:17 in Restaurants

MCD reported August global same-store sales growth of +1.9% versus +3.7% in 2012.  However, the two-year trend ticked up 245 bps sequentially.

 

MCD: Still Not Lovin' It - mcd2 

The U.S. and Europe regions showed same-store sales growth of +0.2% and +3.3%, respectively.  The U.S. missed consensus expectations by 60 bps, while Europe beat by 340 bps.  The two-year trends accelerated sequentially to +1.6% in the U.S. and +3.2% in Europe.  The APMEA region reported same-store sales growth of -0.5% versus +5.7% a year ago, beating consensus expectations by 40 bps.  The two-year trend accelerated sequentially to +2.6%.

 

Overall, August sales were slightly better than we had expected—but not enough to change our fundamental view.  Although Global sales were better than estimates, U.S. sales disappointed and remain a point of concern for us.  MCD continues to refer to the U.S. environment as “persistently challenging,” which, interestingly enough mirrors the chatter we have been hearing from a majority of the larger casual dining companies more so than that of other QSRs.

 

Despite a flurry of recent initiatives regarding new items and menu changes propelling the stock higher, we remain comfortable with our thesis.  In fact, we’ve had a rather bearish take on this news, as we believe these initiatives could add to the operational complexities of McDonald’s stores.  Please see our recent note “MCD: A Pending Mighty Disaster” for more thoughts on this topic.

 

We continue to believe there is a disconnect between investors’ expectations and the company’s fundamentals.  MCD will present tomorrow morning at the Goldman Sachs Global Retailing Conference.  We’ll post on anything incremental following the presentation.

 

MCD: Still Not Lovin' It - penney1

 

MCD: Still Not Lovin' It - MCD Sales Note

 

 

 

Howard Penney

Managing Director

HPenney@hedgeye.com


Hedgeye Statistics

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

  • LONG SIGNALS 80.28%
  • SHORT SIGNALS 78.51%

What Happens If #EOW Fails?

Dubai is ripping. Again.

 

The country’s stock index surged +8.5% today after Obama said the US would put a Syrian strike on hold if they surrender its chemical weapons. (Evidently, the United Arab Emirates likes the no-action in Syria call too.)

 

UAE is up over 55% year-to-date now. Can you begin to imagine what happens if the world doesn't come to an end? Lots to consider.

 

Because despite Nasdaq up over 20% YTD, every downtick in US growth stocks still has everyone and their sister on the edge of their seats worried about it.

 

#EOW?

What Happens If #EOW Fails? - Dubai   QQQ

 

(Editor's note: This is a brief excerpt from Hedgeye CEO Keith McCullough's morning research. For more information on how you can begin receiving our research, please click here.)


MCD: U.S. SALES DISAPPOINT

MCD reported August global same-store sales growth of +1.9% versus +3.7% in 2012.  However, the two-year trend ticked up 245 bps sequentially.

 

The U.S. and Europe regions showed same-store sales growth of +0.2% and +3.3%, respectively.  The U.S. missed consensus expectations by 60 bps, while Europe beat by 340 bps.  The two-year trends accelerated sequentially to +1.6% in the U.S. and +3.2% in Europe.  The APMEA region reported same-store sales growth of -0.5% versus +5.7% a year ago, beating consensus expectations by 40 bps.  The two-year trend accelerated sequentially to +2.6%.

 

Overall, August sales were slightly better than we had expected—but not enough to change our fundamental view.  Although Global sales were better than estimates, U.S. sales disappointed and remain a point of concern for us.  MCD continues to refer to the U.S. environment as “persistently challenging,” which, interestingly enough mirrors the chatter we have been hearing from a majority of the larger casual dining companies more so than that of other QSRs.

 

Despite a flurry of recent initiatives regarding new items and menu changes propelling the stock higher, we remain comfortable with our thesis.  In fact, we’ve had a rather bearish take on this news, as we believe these initiatives could add to the operational complexities of McDonald’s stores.  Please see our recent note “MCD: A Pending Mighty Disaster” for more thoughts on this topic.

 

We continue to believe there is a disconnect between investors’ expectations and the company’s fundamentals.  MCD will present tomorrow morning at the Goldman Sachs Global Retailing Conference.  We’ll post on anything incremental following the presentation.

 

 

 

MCD: U.S. SALES DISAPPOINT - final

 

MCD: U.S. SALES DISAPPOINT - MCD Sales Note

 

 

 

Howard Penney

Managing Director


Morning Reads on Our Radar Screen

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

Keith McCullough – CEO

Obama 'could pause Syria attack plans' (via BBC)

WTI Falls a Second Day on Sign of Diplomatic End to Syria Crisis (via Bloomberg)

Dubai Index Rallies Most Since 2009 on Syria Strike Delay (via Bloomberg)

Japan Readies Stimulus to Cushion Blow of Sales-Tax Increase (via Bloomberg)

China Warns of Jail for Viral Posts Deemed Libel (via NYT)

 

Morning Reads on Our Radar Screen - ob5

 

Daryl Jones – Macro

Young analyst draws Wall Street ire taking on Kinder Morgan (via Reuters)

 

Josh Steiner – Financials

BofA Cuts Jobs as Mortgage Slump Traps JPMorgan, Wells Fargo (via Bloomberg)

 

Jonathan Casteleyn – Financials

France to Submit Syria Chemical Weapons Proposal to UN (JC note: If a settlement is negotiated over Syria...the markets should unwind that big 3% drop in the S&P 500 in August … via Bloomberg)

 

Brian McGough – Retail

Clog Maker Crocs Drops After Cutting Third-Quarter Forecast (BM note: Can $CROX do anything right? Just goes to show how a powerfully fading trend in a brand's core market can decimate its financials. via Bloomberg)

 

Howard Penney – Restaurants

Olive Garden Thinks Tapas Are Cool, Proves Tapas Are Not Cool (via Atlantic Wire)

McDonald’s Selling Steak for Breakfast in Menu Overhaul (via BBW)

Papa Murphy’s debuts new restaurant design (via NRN)

 

 


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