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Howard Penney Has Done It Again, Ladies and Gentleman | $BLMN

Takeaway: Smart investors pay close attention to Howard Penney.

Hedgeye Restaurants sector head Howard Penney is simply on fire. Last week we highlighted his great call on Bloomin’ Brands (BLMN). And guess what? The stock has continued to fall – it’s now down -20% since he added it as a Best Ideas SHORT on November 27, 2013 at $26.71/share. Since this time, 2014 EPS estimates have been revised down from $1.33 to $1.22 and the share price has acted accordingly.

 

Howard Penney Has Done It Again, Ladies and Gentleman | $BLMN - 9

 

Howard also discussed BLMN as one of his favorite short ideas on HedgeyeTV back in April.

 

 

What have we learned here? Pay close attention to Howard Penney.

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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 80.64%
  • SHORT SIGNALS 78.57%

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BLMN: Closing Best Idea Short

We added Bloomin’ Brands (BLMN) to our Best Ideas list on 11/27/2013 at $26.71/share.  Since this time, 2014 EPS estimates have been revised down from $1.33 to $1.22 and the share price has acted accordingly (down ~20%).  With this note we are removing Short BLMN from our Best Ideas list.

 

In our view, Bloomin’ still has issues but we feel our short thesis is largely played out.  At 8.02x EV/EBITDA (NTM) and 16.66 P/EPS (NTM), Bloomin’ screens rather attractively relative to other casual dining companies.  With that being said, we continue to believe casual companies in general are quite expensive.

 

Considering an attractive relative valuation and reset expectations, we believe the short setup is no longer favorable from a risk/reward perspective.  Decelerating two-year same-store-sales trends and stagnant margins continue to give us cause for concern, but staying short at these levels is no longer compelling. 

 

Despite our move to the sidelines, we continue to believe 2015 estimates for 19% EPS growth on 7% revenue growth are too aggressive.

 

Research Recap:

New Best Idea: Short Bloomin’ Brands (11/27/2013)

BLMN: A Bloomin’ Mess (01/13/2014)

BLMN: Beat & Guide Down (02/25/2014)

BLMN: Still Bearish (05/09/2014)

 

BLMN: Closing Best Idea Short - 1

 

Howard Penney

Managing Director

 

Fred Masotta

Analyst


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