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NCLH 2Q YOUTUBE

In preparation for NCLH's F3Q 2013 earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.

 

 

NCLH 2Q YOUTUBE - nclh

 

GETAWAY

  • Norwegian Getaway, is getting ready for her debut in Miami early next year.

3Q CAPACITY SCHEDULE

  • Looking at deployment for the third quarter, our capacity in each itinerary is as follows. Our Europe program has 28% in the Mediterranean and 8% in the Baltic. We have approximately 20% each in Alaska and Bermuda, 13% in the Caribbean, 7% in Hawaii, and the balance made up of other itinerary.

PROMOTIONAL SPENDING

  • I would say that we've had some promotional activities going on following that. And when I look at it right now, I would say that things in the last few weeks seem to have been a little bit better. And I think some of the noise as well is – some of the players may be doing a little bit more from a promotional standpoint to fill up their ships.  Having said that, what I'm seeing now is that will play out over the remainder of this year.

ONBOARD REVENUE

  • Onboard, we have a great quarter – some of it is Breakaway, some of it is just the continuing efforts we have. I would tell you that the remainder of the year is built into our forecasted guidance and yields...But it is a little lumpy.

EUROPE

  • We've been able to bottom out in Europe market with yields and we're starting to see the ticket yields improving. But there are a few more Europeans on the ships than what has been the trend.
  • On the margin, we're seeing a bit more of the Americans, but we're also seeing quite a few – and you look at the European economic situation, you're getting a little bit of a later booking from some of these countries. And we're all fighting for the same number of consumers. So in some cases, you're getting people that are spending a little bit less from the European side.

2014

  • We're feeling pretty decent about what's going on for next year, although it's early. We're feeling pretty good about the booking patterns for 2014. First quarter, we're feeling very good about both on the load and the price.

SHARE REPURCHASE 2H 2014?

  • My preference would probably be given where we are, it would probably to be in the stock repurchase program.

 


$AAPL, LEVELS REFRESHED

Takeaway: The world’s largest tech company is set to report earnings today. Here are Hedgeye CEO Keith McCullough's trading levels in advance.

$AAPL, LEVELS REFRESHED - AAPL

 

Trade :: Trend :: Tail Process - These are three durations over which we analyze investment ideas and themes. Hedgeye has created a process as a way of characterizing our investment ideas and their risk profiles, to fit the investing strategies and preferences of our subscribers.

  • "Trade" is a duration of 3 weeks or less
  • "Trend" is a duration of 3 months or more
  • "Tail" is a duration of 3 years or less

Anything longer than 3 years is unpredictable

 

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Under Armour: EXPENSIVE

Takeaway: UA may face a tough margin stretch ahead. Great company, but we can find other stocks with better growth at a lower price.

This note was originally published October 24, 2013 at 12:03 in Retail

Under Armour: EXPENSIVE - ua1

Under Armour (UA) might have a couple tough margin quarters ahead of it.  The good news is that its finally making progress outside the United States.

 

UA is a great company that is coming into its own, but it may face a couple of tough margin quarters ahead. UA is one of the most expensive names in consumer, and we can find other stocks with higher quality growth at a lower price.

 

Given how hated UA's stock is (see our sentiment monitor in Exhibit 1) we suspected that material revenue beat followed by a better print on the EPS line would be enough to give this stock a shot in the arm.

 

Under Armour: EXPENSIVE - brian1

 

But then we flipped over to the balance sheet and a 59% boost in inventories (despite only a 25.7% boost in sales), and juxtaposed that against the -33bp erosion in Gross Margins in the quarter. Any way we slice the onion, bloated inventories and weakening gross margins hardly inspires confidence in any financial model.  In fact it is almost always a precursor to additional gross margin weakness.

 

WHEN A BRANDS LINE SWINGS DOWN AND FLIRTS WITH THE LOWER RIGHT QUADRANT, IT'S NEVER GOOD

Under Armour: EXPENSIVE - UAsigma

Also, footwear sales were up 28% in the quarter. Don't get us wrong -- that's a great number for most brands. This isn't most brands -- it's UnderArmour. A few years ago when the footwear product used to -- well…stink -- we'd expect sub par growth. But the brand has finally figured out its identity and has put out product that consumers actually want to wear -- -both men and women. But does this add up to 28% growth? We'd think something greater -- perhaps even 2x (at least if it wants to maintain a 48x forward multiple.)

 

Under Armour: EXPENSIVE - UAPE

Let's put that multiple into perspective for a minute… UA is expensive -- period. But some of the best stocks in the market are expensive (and some of the worst stocks are cheap). We're not a fan of PE/Growth multiples. But when looked at alongside other high growth peers it certainly puts things into perspective we can get a good sense as to relative value.  SO let's do that…lets compare UA against a who's who of high-flying consumer growth names. We're talking everything from TSLA, CMG, AMZN, UA, NFLX, KORS, NKE, WWW, RL, FNP, FNP and RH.  Unfortunately for UA, it tips the scale along with TSLA, AMZN and NFLIX at 2.0x PEG.  As an aside, our favorite name is RH -- the cheapest name on the page.

 

 

There were definitely some things we liked this quarter, and those focused on the areas where UA has been damaged goods in the past -- The biggest of those is International where It just opened up a huge Brands experience store in Shanghai, which is a great idea no matter how you slice it.  For the first time in…well, ever…it looks like UA can get 10% of its sales outside of these United States. That would be a big valuation kicker for US, because there's a fair sized contingent that thinks UA is forever rooted in the US. We disagree, by the way. Secondly, womens continues to outpace the company's overall growth rate, and now accounts for about 30% of total revenues. To put that into perspective, Nike announced last week that it's targeting its women's business to account for 24% of revenues by 2018. UA, already has a well established women's product, and if womens were to account for nearly half of the business in the years to come as company management indicated that could be a serious growth opportunity.


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European Banking Monitor: Further Improvement

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .

 

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European Financial CDS - Swaps widened modestly in Europe last week, rising by an average 4 bps (median: +2 bps).  

 

European Banking Monitor: Further Improvement - z. banks

 

Sovereign CDS – Sovereign swaps showed further improvement across Europe with the exception of Germany, which widened by 3 bps, though still trades well inside of the US. Interestingly, the US widened again last week, adding 3 bps and rising to 37 bps. 

 

European Banking Monitor: Further Improvement - z. sov 1

 

European Banking Monitor: Further Improvement - z. sov2

 

European Banking Monitor: Further Improvement - z. sov3

 

Euribor-OIS Spread – The Euribor-OIS spread tightened by 1 bps to 11 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. 

 

European Banking Monitor: Further Improvement - z. euribor


MACAU HEADED FOR 30%+ GROWTH

While slower than recent weeks due to seasonality, Macau put up another strong week, up 23% YoY.  Our October GGR growth forecast remains at +30-32%.  We continue to hear positive anecdotal evidence of a strong Mass month with consistently high casino traffic.

 

In terms of market share, the Asian companies continue to dominate this month.  SJM and Galaxy are posting share well above their recent trend.  LVS’s share has improved but remains below trend.  We’re pretty sure the LVS properties held low in the first half of the month.  While Wynn’s share looks low – also likely hold-related – we think that property is becoming more aggressive on the Mass side and should see Mass share gains going forward (possibly at the expense of MGM).

 

MACAU HEADED FOR 30%+ GROWTH - macau1

 

MACAU HEADED FOR 30%+ GROWTH - macau2


MONDAY MORNING RISK MONITOR: KEEPING AN EYE ON CHINA

Takeaway: China's interbank lending rate rose 109 bps W/W to 409 bps. Sovereign and institutional swaps widened, reversing their recent trend.

Risk Monitor / Key Takeaways:

A few of the notable callouts on the risk front this morning include China's interbank lending rate, Shifon, rising 109 bps W/W to 409 bps and a broad-based reversal in CDS at both the institutional and sovereign level.

 

* Chinese interbank rates rose 109 basis points last week, ending the week at 4.09% versus last week’s print of 3.00%. 

 

* Sovereign swaps showed further improvement across Europe with the exception of Germany, which widened by 3 bps, though still trades well inside of the US. Interestingly, the US widened again last week, adding 3 bps and rising to 37 bps. 

 

* High Yield rates fell 7.4 bps last week, ending the week at 5.92% versus 5.99% the prior week.

 

Financial Risk Monitor Summary

 • Short-term(WoW): Negative / 4 of 13 improved / 4 out of 13 worsened / 5 of 13 unchanged

 • Intermediate-term(WoW): Positive / 8 of 13 improved / 2 out of 13 worsened / 3 of 13 unchanged

 • Long-term(WoW): Negative / 2 of 13 improved / 2 out of 13 worsened / 9 of 13 unchanged

 

MONDAY MORNING RISK MONITOR: KEEPING AN EYE ON CHINA - 15

 

1. U.S. Financial CDS -  In the US, swaps widened for 16 out of 27 financial institutions. The average and median increase were both 3 bps. On a M/M basis, however, swaps remain tighter by 7-8 bps. The large cap banks all worsened on the week with JPM, BAC and C all widening by 6 bps. WFC, GS and MS, however, all tightened by 1 bp.

 

Tightened the most WoW: AXP, COF, PRU

Widened the most WoW: C, UNM, ALL

Tightened the most WoW: AXP, COF, CB

Widened the most/ tightened the least MoM: MBI, GNW, GNW

 

MONDAY MORNING RISK MONITOR: KEEPING AN EYE ON CHINA - 1

 

2. European Financial CDS - Swaps widened modestly in Europe last week, rising by an average 4 bps (median: +2 bps).  

 

MONDAY MORNING RISK MONITOR: KEEPING AN EYE ON CHINA - 2

 

3. Asian Financial CDS - Chinese banks widened last week following the blow-out in the interbank lending rate. Indian banks, meanwhile, went the other way, tightening by 13-22 bps. Japanese Financials were largely unchanged on the week.

 

MONDAY MORNING RISK MONITOR: KEEPING AN EYE ON CHINA - 17

 

4. Sovereign CDS – Sovereign swaps showed further improvement across Europe with the exception of Germany, which widened by 3 bps, though still trades well inside of the US. Interestingly, the US widened again last week, adding 3 bps and rising to 37 bps. 

 

MONDAY MORNING RISK MONITOR: KEEPING AN EYE ON CHINA - 18

 

MONDAY MORNING RISK MONITOR: KEEPING AN EYE ON CHINA - 3

 

MONDAY MORNING RISK MONITOR: KEEPING AN EYE ON CHINA - 4

 

5. High Yield (YTM) Monitor – High Yield rates fell 7.4 bps last week, ending the week at 5.92% versus 5.99% the prior week.

 

MONDAY MORNING RISK MONITOR: KEEPING AN EYE ON CHINA - 5

 

6. Leveraged Loan Index Monitor – The Leveraged Loan Index rose 7.0 points last week, ending at 1818.

 

MONDAY MORNING RISK MONITOR: KEEPING AN EYE ON CHINA - 6

 

7. TED Spread Monitor – The TED spread fell 1.2 basis points last week, ending the week at 20.4 bps this week versus last week’s print of 21.56 bps.

 

MONDAY MORNING RISK MONITOR: KEEPING AN EYE ON CHINA - 7

 

8. CRB Commodity Price Index – The CRB index fell -1.8%, ending the week at 283 versus 288 the prior week. As compared with the prior month, commodity prices have decreased -1.5% We generally regard changes in commodity prices on the margin as having meaningful consumption implications.

 

MONDAY MORNING RISK MONITOR: KEEPING AN EYE ON CHINA - 8

 

9. Euribor-OIS Spread – The Euribor-OIS spread tightened by 1 bps to 11 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. 

 

MONDAY MORNING RISK MONITOR: KEEPING AN EYE ON CHINA - 9

 

10. Chinese Interbank Rate (Shifon Index) –  The Shifon Index rose 109 basis points last week, ending the week at 4.09% versus last week’s print of 3.00%. The Shifon Index measures banks’ overnight lending rates to one another, a gauge of systemic stress in the Chinese banking system.

 

MONDAY MORNING RISK MONITOR: KEEPING AN EYE ON CHINA - 10

 

11. Markit MCDX Index Monitor – Last week spreads tightened 4 bps, ending the week at 85 bps versus 89 bps the prior week. The Markit MCDX is a measure of municipal credit default swaps. We believe this index is a useful indicator of pressure in state and local governments. Markit publishes index values daily on six 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. We track the 16-V1.

 

MONDAY MORNING RISK MONITOR: KEEPING AN EYE ON CHINA - 11

 

12. Chinese Steel – Steel prices in China fell 0.5% last week, or 19 yuan/ton, to 3480 yuan/ton. We use Chinese steel rebar prices to gauge Chinese construction activity, and, by extension, the health of the Chinese economy.

 

MONDAY MORNING RISK MONITOR: KEEPING AN EYE ON CHINA - 12

 

13. 2-10 Spread – Last week the 2-10 spread tightened to 221 bps, -6 bps tighter than a week ago. We track the 2-10 spread as an indicator of bank margin pressure.

 

MONDAY MORNING RISK MONITOR: KEEPING AN EYE ON CHINA - 13

 

14. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows 1.4% upside to TRADE resistance and 2.3% downside to TRADE support.

 

MONDAY MORNING RISK MONITOR: KEEPING AN EYE ON CHINA - 14

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT

 


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