The Economic Data calendar for the week of the 21st of October through the 25th is full of critical releases and events. Attached below is a snapshot of some (though far from all) of the headline numbers that we will be focused on.
With SPX constituent earnings set to crescendo over the next couple of weeks, below we provide a quick look at early earnings trends across the S&P500
Beat-Miss: We’re currently running on par with 2Q13 results with ~54% and ~70% of companies beating top and bottom line estimates, respectively.
Style Factor Performance: On balance, earnings results have tracked style factor price performance with small cap, lower yield, higher growth companies performing better vs prevailing expectations while Higher Yield, Lower Beta/Short Interest/Leverage companies are coming in on the wrong side of sales growth estimates.
Fundamental Performance: Mixed results here with only ~50% of companies reporting registering sequential acceleration in sales or earnings growth. Margin performance has been slightly worse with >50% of companies reporting sequential margin contraction. Peak margins/corporate profitability and largely exhausted cost leverage will remain an ongoing fundamental overhang.
From a sector perspective, Healthcare, Financials, & Consumer Discretionary are the fundamental laggards while Materials, Tech and Energy are reflecting improving sales/earnings growth trends.
Enjoy the weekend.
*Note: Prices/Data as of 10/17/13 close
Christian B. Drake
Takeaway: HBI shows MFB accretion guidance is low. UA takes a page out of NKE's playbook. KMart turns to Nicki Minaj to halt sales decline. HIBB M TOY
This note was originally published October 18, 2013 at 08:43 in Retail
EVENTS TO WATCH
VFC - Earnings Call: Monday 10/21 8:30 am
HBI - US: Hanesbrands to axe half of Maidenform's workforce
Takeaway: I guess we know why they bought MFB -- for the brands, and nothing else. This synchs with our view that this deal will be far more accretive than the company guided towards.
UA - Under Armour challenges techies to develop future products
Takeaway: Taking one right out of Nike's playbook -- again (as they should). Note that Nike held a major competition this summer for people to come up with new commercial product to elevate Nike's technological platform and marry with marketable product.
M - Macy’s strategy for Black Friday sales uncovered when ad leaked
Takeaway: They make it sound like it was a leak…but sounds to me like it was intentional.
KER - Gucci Awarded $144.2M Against Online Counterfeiters
Takeaway: The domain names are enforceable -- and therefore are history. But KER will never see a dime of the $144mm.
HIBB - Hibbett Sports Announces Transition Plan for Mickey Newsome
Takeaway: HIBB might be a tiny company, but Newsome is a major dominant force. Life without him will be a definite change for HIBB.
SHLD - Nicki Minaj Launches Fashion Line for Kmart
Takeaway: Nicki is definitely an influencer, but does her fan base shop at K-Mart? This is a binary event for SHLD, but the upside potential is greater than the downside risk.
TOYS - No Joy in Toys 'R' Us Land
Takeaway: Interesting article showing the dynamics behind the ownership structure at TRU. Be careful who you partner up with when when buying something.
Bonmarché - Bonmarché prepares stock exchange flotation
Takeaway: Does Bonmarché really deserve to be public?
New Research Uncovers Which Email Promotions Generate the Most Revenue for Online Retailers
Japan’s August Clothing Imports Up 21.4%
Takeaway: The biggest import number we've ever seen out of Japan. Ever is a long time.
E-Commerce Trends in China: By the Numbers
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Takeaway: Mr. Market has been muting perma fear mongers with impunity.
The S&P 500 is up over +3.0% for October. It's up over +21% year-to-date. The perma fear-mongers nailed it. Right? Wrong.
Moving on… now with a lot of hands forced to cover-and-chase, there’s a lot to do. In a Burning Bernanke Buck tape, we like being #EuroBulls more than buying more USA up here. It’s been a great year being long US growth stocks. Lock more of that in.
Takeaway: In an improved M&A landscape, Greenhill (GHL) stock would perform very well.
As we expected, Greenhill’s 3rd quarter earning’s result was weak, missing estimates with a result of $0.06 per share in earnings versus consensus at $0.12 per share. With a current stock dividend yield of 3.7%, and a yield that has never gone above 5.0%, we think we are close to an attractive entry point for GHL shares.
As we articulated in our recent Hedgeye M&A Blackbook, we think the M&A market could have a positive 2014 which would be above Street expectations for the following reasons:
1.) Near record amounts of cash are building up on corporate balance sheets
2.) The U.S. private equity sector has just raised new capital for the first time in 4 years that needs to be invested
3.) That an inflection point in economic activity is being made in Europe which will improve M&A activity there regionally
4.) That the ongoing secular decline in U.S. volatility will spur M&A activity into 2014 as it has done historically
In an improved M&A landscape, Greenhill (GHL) stock would perform very well.
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