Week Ahead

The Economic Data calendar for the week of the 12th of May through the 16th of May is full of critical releases and events.  Attached below is a snapshot of some of the headline numbers that we will be focused on.


Week Ahead - 05.09.14 Week Ahead

Poll of the Day Recap: 53% See Pain Ahead For the S&P 500 | $RUT $SPX

Takeaway: 53% said PAIN AHEAD; 47% ALL CLEAR.

As CEO Keith McCullough wrote in today’s Morning Newsletter, the Russell 2000 small-cap index “is down -9.1% from its all-time-bubble-peak in March…Whereas the SP500 is only -0.8% from her all-time-twitter-muscles-but-but-the-market-isn’t-down-yet peak.”

That said, we asked in today’s poll: Is the big drop in the Russell 2000 predicting pain ahead for the S&P 500?


Poll of the Day Recap: 53% See Pain Ahead For the S&P 500 | $RUT $SPX - 4097410360 df7bd876aa z 620x413

At the time of this post, 53% agreed they saw PAIN AHEAD; 47% said ALL CLEAR.

Voters who think there is PAIN AHEAD said:

  • “$RUT led the way up, it will lead the way down. It does not have the slow growth sectors within it, like Utilities, Telecom, Staples, etc.”
  • “As realisation the FED is cornered takes effect the low volume won't be able to support these prices.”
  • “Record leverage, Yen, unrealized profits, Macd on the monthly chart looks VERY SCARY!!  Completing very defined head and shoulders. Running out of morons to buy. Volume and Breadth is absolutely pathetic.  Can’t figure out what the delay is all about except the big boys are trying to gently distribute without bringing the market down. I think the supply of idiots is beginning to run low. Looking for a big move soon.  OH, almost forgot, Keynesian economics is a fraud designed to usurp political power from morons, not really gonna "actually" work financially. Oh well I guess all of our kids and grandkids will figure it out since they will have lots of time to do their homework on it without all those pesky jobs to take up all their time.”
  • “Quarterly earnings seem to be more about buybacks than beating what were already lower adjusted estimates. YoY consumer spending for things other than food, gas & electricity will show deceleration. This will not bode well for next quarter.”


Conversely, those who believe it is ALL CLEAR said, “Don't fight the FED,” and that “this is just a bump in the road.”


This Stock Cratered -50% Since Hedgeye's Todd Jordan Issued His Warning

Takeaway: Reason #474 why you should be tuning into HedgeyeTV.

Don't say we didn't warn you.


This Stock Cratered -50% Since Hedgeye's Todd Jordan Issued His Warning - TJ

On October 11th, Gaming, Lodging & Leisure Sector Head Todd Jordan appeared on HedgeyeTV and warned investors about Scientific Games (SGMS). The stock is down 50% since Jordan's short call.


It gets better (or worse -- depending on who you ask).


He also warned viewers about IGT.


This Stock Cratered -50% Since Hedgeye's Todd Jordan Issued His Warning - TJ1


Click video below to see the other stock he warned about.

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BLMN: Still Bearish

BLMN remains on the Hedgeye Best Ideas list as a SHORT.

BLMN reported underwhelming numbers this morning, missing both top and bottom line estimates by 69 bps and 288 bps, respectively.  Same-store sales across all four main concepts decelerated on a two-year basis in 1Q14, despite initiatives aimed at stemming this decline.  Traffic trends remain anemic, although they continue to outpace the casual dining industry according to Knapp Track data.  This is to be expected, as weekday lunch continues to rollout across Carrabbas and Outback restaurants.  Management maintained full-year guidance of 1-2% comp growth for its core domestic brands and GAAP diluted EPS of at least $1.21 on a calendar basis.  Trends will need to accelerate meaningfully throughout the rest of the year in order for BLMN to hit the numbers.  The real disconnect, however, comes in FY15 with the street expecting 20% EPS growth on 7% EPS growth.  These numbers are far too high and will be revised down, over time, as this becomes a realization.


We continue to believe the casual dining industry is in secular decline.  In the new era of casual dining, companies with large, diverse portfolios are at a structural disadvantage to smaller, more nimble players.  Darden is currently having issues operating its vast array of brands and we believe Bloomin’ is on a similar path.  As it stands, Bloomin’ has some of the worst operating margins in the entire restaurant industry.  Despite claims of significant efficiencies, its profit margins have essentially remained flat since the beginning of 2011. 


Aside from taking issue with the structure of the company, we continue to question the strategic rationale behind the company’s capital allocation decisions.  Management seems intent on maintaining its unit growth story, despite less than desirable results.  Carrabbas, for example, should not be growing at all.  Recognizing a problem and not immediately addressing it is a flawed strategy that will inevitably come back to haunt the company.


What We Liked:

  • Outback Steakhouse same-store sales growth of +0.8%
  • Interior remodel at Outback complete, exterior remodel underway
  • Currently rolling out Saturday lunch at Bonefish Grill; new core menu coming in 3Q
  • Brazil same-store sales and cash flow generation remain strong
  • Maintained +2-4% commodity inflation outlook; majority of 2014 needs are locked


What We Didn’t Like:

  • Two-year same-store sales decelerating across four core brands
  • System-wide traffic decline of -1.6%
  • Carrabba’s same-store sales decline of -1.8%; cited competitive pressure in the Italian segment
  • Carrabba’s new menu (rolled out at the end of Feb.) “hasn’t driven incremental traffic”
  • Bonefish same-store sales decline of -1.5%
  • Weakness in Korea largely offset strength in Brazil
  • U.S. restaurant margins were negatively impacted by a new menu launch and advertising costs
  • Operating margins decreased to 8.4% from 8.9%
  • Management refuses to halt new unit growth at Carrabbas



BLMN: Still Bearish - 1


BLMN: Still Bearish - 2


BLMN: Still Bearish - 3


BLMN: Still Bearish - 4




Howard Penney

Managing Director


Fred Masotta


Cartoon of the Day: Yield-Chasing Hamsters

Takeaway: The complexion of the US stock market this year has become a slow-growth-yield-chaser.

Cartoon of the Day: Yield-Chasing Hamsters - Yield chasing hamsters 5.09.2014


As CEO Keith McCullough wrote in today’s Morning Newsletter, "If you’re a levered long high-multiple-growth-momentum-chaser, you may not like the complexion of the US stock market this year, but that doesn’t change what it’s become – a slow-growth-yield-chaser."

Learn More about Hedgeye.

Real Conversations: Rickards, McCullough Unplugged on Fed, USD, Economy & More

Controversial best-selling author James Rickards sits down with Hedgeye CEO Keith McCullough to discuss a number of important subjects in this wide ranging interview.

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