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Stock Report: Hologic, Inc. (HOLX)

Stock Report: Hologic, Inc. (HOLX) - HE HOLX T 3 28 14

THE HEDGEYE EDGE

We think Hologic is emerging from an extremely tough period which has left investors wary of further missteps. In out view, Hologic and it's new management are set to show solid growth over the next several years.

 

We have built two survey tools to track and forecast the two critical elements that will drive this acceleration.  

 

The first survey tool measures 3-D Mammography placements every month.  Recently we have detected acceleration in month over month placements.  When Hologic finally receives a reimbursement code from Medicare, placements will accelerate further, perhaps even sooner.  With our survey, we'll see it real time.

 

In addition to our mammography survey. We've been running a monthly survey of OB/GYNs asking them questions to help us forecast the rest of Hologic's businesses, some of which have been faced with significant headwinds.  Based on our survey, we think those headwinds are fading.

 

TIMESPAN

INTERMEDIATE TERM (TREND) (the next 3 months or more)

Carl Icahn has recently declared his interest in Hologic.  We are not quite sure what his plans are to improve the company. Speculation has been somewhat dampened by public comments made by management.  At a minimum, Icahn's involvement provides some downside protection for the shares.

 

 

LONG-TERM (TAIL) (the next 3 years or less)

If the Affordable Care Act actually manages to reduce the number of uninsured, Hologic is one of the best positioned companies.  When we measured the increase in products and services these typically younger uninsured individuals will consume when they get insurance, Hologic's products are at or near the top of the list.  As the ACA matures over the coming years, we'd expect a tailwind for HOLX.

 

  

ONE-YEAR TRAILING CHART

Stock Report: Hologic, Inc. (HOLX) - HE HOLX C 3 28 14


Nike is Betting Big on Johnny Manziel | $NKE

Takeaway: We don't like the stock here. We like this development.

Editor's Note: This is a complimentary research excerpt from Retail Sector Head Brian McGough. For more information on our services, click here.

 

Nike is Betting Big on Johnny Manziel | $NKE - 1b263215f5c9551a0593fa93de01ad79 crop north

 

Nike Showcases Johnny Manziel Pro Day Collection

 

• "Nike, which recently signed Johnny Manziel to an endorsement contract, is wasting no time cashing in. At Texas A&M's pro day on Thursday, Manziel elected to wear Nike full pads and helmet, a move that surprised scouts and the media since most players do not suit up with a helmet during these types of workouts. Nike tweeted out a link to buy all the items from the Manziel 'Pro Day Collection.'”

 

Nike is Betting Big on Johnny Manziel | $NKE - chart1 3 28

Takeaway from Hedgeye’s Brian McGough:

Let's be clear. We still think that Texas A&M quarterback Johnny Manziel is a colossal, gigantic, enormous, huge blow-up risk. 

 

But we give Nike a lot of credit on how they're handling this one.


Their old method was:

1)      Endorse big athletes;

2)      Stick them in ads; and

3)      Hope that it trickles down to the mainstream product.

 

In this case, though, Nike has a full array of products associated with Manziel for Pro Day –far from when he even will even see a snap in the NFL.  This marks a fundamental change for how Nike is handling endorsements.

 

We still don't like the stock here…but we do like this development.

Subscribe to Hedgeye.



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STALL SPEED: INCOME, SPENDING & CONFIDENCE

Summary: 

  • Both incomes and spending decelerated in February while Core PCE inflation was static at a dovish, stall speed of just 1.1%. 
  • The income/spending deceleration was broad based with some negative weather drag, but the trend is one of deceleration and the primary pockets of spending strength in February are likely to be ephemeral.
  • High End Demand: It turns out that the rich are still pretty rich and high ticket discretionary spending saw a moderate bounce in February.  Wealth effect spending, however, probably continues to ebb.
  • Healthcare Spending:  At ~19% of Total household expenditures, spending on Medical Care matters, and Obamacare is distorting the numbers.  
  • Confidence: March marked a second month of mixed consumer confidence reports. Sentiment continues to meander alongside the dollars descent.  
  • FINALLY!:  Outside of some lagging housing data, all the material domestic, fundamental macro data for February has been reported….enjoy the oversold bounce and blithely enter the weekend knowing the vexatious ubiquity of weather caveat-ed macro releases has finally ended. 

 

STALL SPEED: INCOME, SPENDING & CONFIDENCE - Income   Spending Table Feb

 

STALL SPEED: INCOME, SPENDING & CONFIDENCE - Eco Summary Table 032814

 

 

PERSONAL INCOME:   3 Months of Deceleration

 

Weather probably served as a negative distortion on reported, aggregate personal income in February, but with total Personal Income, Disposable Personal Income (DPI), DPI per capita and Private Sector Salary & Wage growth all decelerating for the 3rd consecutive month in February it feels hard to argue that weather is masking a strong underlying trend of acceleration. 

 

STALL SPEED: INCOME, SPENDING & CONFIDENCE - Personal Income Feb

 

Private Sector Salaries and Wages decelerated by -60bps and -50bps on a YoY and 2Y basis, respectively, while aggregate government sourced wage income accelerated 30bps on a 1Y while holding flat sequentially on a 2Y basis. 

 

Alongside the spending friendly budget deal and ongoing positive state & local government employment growth, we continue to expect government salary and wage income to provide some modest upside to income growth in 2014. 

 

The savings rate ticked up to 4.3% from 4.2% but remains near historical trough levels.

 

The capacity for a further decline in savings to support incremental consumption growth remains very much constrained at current levels.   

 

STALL SPEED: INCOME, SPENDING & CONFIDENCE - Salary   Wages

 

STALL SPEED: INCOME, SPENDING & CONFIDENCE - Savings Rate 

 

CONSUMER SPENDING:  Healthcare & High End Discretionary supported February consumption expenditures.  The former is either transient or likely to be revised significantly and the latter isn’t likely to repeat last year’s performance.   

 

HIGH END DEMAND:  Last month we highlighted the deceleration in demand at the high end as implied by the slowdown in spending on luxury durables. 

 

As it turns out, however, the rich are still pretty rich and high ticket discretionary spending saw a moderate bounce in February (see yesterday’s note for more on the latest income division dynamics - INFLECTIONS OR FALSE POSITIVES?). 

 

The read through here is mixed as the contribution to total durables growth from higher-end discretionary helped mask more broader weakness. 

 

Further, with stocks flat YTD, housing decelerating and the Fed beginning to reign in their explicit, asset re-flation (i.e. wealth effect) policy agenda, the probability for the top income quartiles to provide incremental demand growth (in similar magnitude to last year) seems to be diminishing.

 

STALL SPEED: INCOME, SPENDING & CONFIDENCE - PCE Luxury

 

STALL SPEED: INCOME, SPENDING & CONFIDENCE - Luxury Goods   Contribution

 

HEALTHCARE SPENDING:  DISTORTED, TRANSIENT OR BOTH?

Spending on Healthcare Services has been the notable positive outlier over the last few month and the effect stems largely from the implementation of Obamacare.

 

The reported figures are very much an estimate and the preliminary data are likely to be revised significantly over time as the Census bureau’s quarterly QSS and annual SAS survey’s provide harder data.   

 

With reported Hospital and Outpatient spending both accelerating materially, it could also be that individuals are accelerating medical consumption ahead of ACA implementation and uncertainty around coverage changes. 

 

Either way, in the context of the broader spending data, the takeaway is pretty straightforward – Healthcare Services represent ~19% of total household consumption expenditures and certainly impacts the direction of reported, headline consumption growth.    

 

To the extent that deceleration is the larger trend across the balance of services, a mis-estimation of ACA related spending and/or a significant, transient pull-forward in medical consumption could be materially distorting the prevailing, underlying trend. 

 

Unfortunately, like the now ubiquitous weather asterisk, we’ll just have to hurry up and wait to get a clearer read on the magnitude of the impact. 

 

STALL SPEED: INCOME, SPENDING & CONFIDENCE - Healthcare PCE

 

 

 

CONSUMER CONFIDENCE:  Across the primary survey's, March proved to be a second straight month of meandering for consumer confidence. 

 

The final University of Michigan Consumer Sentiment reading for March declined -1.6pts sequentially to 80.0 – the worst reading in 4 months. 

 

The conference board and Bloomberg Surveys, meanwhile, showed consumer confidence improving by 4pts and 1.6pts, respectively, in March.    

 

Notably, the relationship between the $USD and confidence remains reasonably strong.   The dollar is currently in Bearish Formation (Broken Trade, Trend & Tail) and with growth slowing and commodity inflation accelerating the balance of risk for the currency remains to the downside, in our view.  

 

STALL SPEED: INCOME, SPENDING & CONFIDENCE - USD vs Confidence

 

STALL SPEED: INCOME, SPENDING & CONFIDENCE - Confidence Table 032814

 

 

Christian B. Drake

@HedgeyeUSA

 


Why This Retail Analyst Thinks Restoration Hardware's Run Is Just Beginning | $RH

Hedgeye Retail Sector Head Brian McGough remains Wall Street's biggest bull on Restoration Hardware (RH).

 

Shares surged over 12% today after the company reported better-than-expected results and guidance. 

 

Take a look at the brief video below to see why he believes RH has significant room to run.

 

 

 

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VIDEO | Keith's Macro Notebook 3/28: EUROPE COMMODITIES UST 10YR


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