Higher estimates should continue the positive momentum in the stock.
Keith bought MPEL in the Hedgeye Virtual Portfolio today at $14.73 ahead of its upcoming Q2 earnings report. The stock is trading close to a key TRADE support level. MPEL has been our top idea for almost a year due to our projections of consistenly better than expected earnings. The Q2 earnings release should be the best of the bunch and will likely be the next catalyst. The company has gained market share YoY, despite Galaxy Macau opening on Cotai, and July share has been trending higher for MPEL so Q3 also looks like a big beat. At 12x 2012 EBITDA, MPEL is still trading at a discount to most of the Macau players despite the huge outperformance of the stock. Layering in the future development of the best site in all of Macau - Macau Studio City - completes the MPEL growth story.
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THE HEDGEYE BREAKFAST MENU
Notable news items and price action in the restaurant space, as well as our fundamental view on select names.
Yesterday, the KC FED Manufacturing survey showed the pace of hiring slowed sharply, as the employment index fell by 13 points to 4, the lowest level since October 2010.
After improving modestly for two weeks, the Bloomberg consumer comfort index slipped to a two-month; all three components were lower in the latest week. Sentiment dropped 3.5 points, to -46.8 for the week ended July 24.
The Coffee Bubble Watch
It is ludicrous to pay a higher multiple for the Dunkin’ Donuts “growth” story than the growth that Starbucks promises. Starbucks has delivered for years as a public company and is a global brand with quantifiable and undeniable appeal for consumers, globally. Dunkin’ Donuts is a great but regional domestic brand with no track record as a public company. Sure, the company plans to grow into new domestic markets but growth is expensive as BWLD discussed on its earnings call. Furthermore, if the brand doesn’t resonate as much as expected in new markets, and the ROI doesn’t meet what the current multiple implies it should be, it could pop the Dunkin’ bubble.
Initial jobless claims dropping below 400k was a positive sign for employment yesterday. Stocks reacted to the number positively at the open and QSR stocks caught a bid after trading softly recently.
- Coffee is where the action is: 7 of the 10 best performing names in the QSR space are coffee related.
- SBUX reported strong EPS and comps for the third fiscal quarter after the close yesterday. We see SBUX, even after the run that the stock has been on, as a far better deal for investors than DNKN.
- MCD is to open one restaurant in China per day for four years.
- MCD is adding a baguette bread stick to its menu in France.
- KONA continues to outperform. Consensus EPS have risen 170% since the company blew the doors off last quarter.
- RT and PFCB have seen consensus estimates decline by 17% and 15%, respective.
- RUTH company same-restaurant sales increased 5.8% at Ruth’s Chris Steak House and company same-restaurant sales declined -1.4% at Mitchell’s Fish Market. EPS came in at $0.10 ex-items versus consensus $0.11.
- RUTH also announced that Executive Vice President & Chief Financial Officer Bob Vincent will transition to a newly created position of Senior Vice President of Corporate Strategy, starting August 8th. Effective the same date, Arne Haak will assume the role of CFO. Mr. Haak comes from AirTran Airways, a subsidiary of LUV.
The Macau Metro Monitor, July 29, 2011
SINGAPORE'S JOBLESS RATE RISES 2.1% IN JUNE Channel News Asia
S'pore's unemployment rate rose to 2.1% in June from 1.9% in March as employment growth slows and graduates enter the job market. Total employment grew by 22,800 in Q2 - about 20% lower compared to the previous quarter of 28,300. Services led the growth with jobs gains within the retail, F&B and hospitality industries.
THE HEDGEYE DAILY OUTLOOK
TODAY’S S&P 500 SET-UP - July 29, 2011
As we see it the Debt Ceiling Debate = political drama; that’s it – it’s not being priced into either A) a US currency crash or B) US Treasury Yield credit risk. Sure, it’s being priced into US stocks, but I think what people are missing is that so are A) Europig problems and B) EPS expectations. As we look at today’s set up for the S&P 500, the range is 24 points or -0.67% downside to 1292 and 1.18% upside to 1316.
SECTOR AND GLOBAL PERFORMANCE
- ADVANCE/DECLINE LINE: -725 (+1836)
- VOLUME: NYSE 986.85 (-10.22%)
- VIX: 23.74 +3.31% YTD PERFORMANCE: +33.75%
- SPX PUT/CALL RATIO: 1.60 from 2.92 (-45.29%)
CREDIT/ECONOMIC MARKET LOOK:
- TED SPREAD: 18.28
- 3-MONTH T-BILL YIELD: 0.07% -0.01%
- 10-Year: 2.98 from 3.01
- YIELD CURVE: 2.56 from 2.57
MACRO DATA POINTS:
- 8:30 a.m.: GDP, QoQ Annualized: est. 1.8%, prior 1.9%
- 8:30 a.m.: Personal consumption, est. 0.8%, prior 2.2%
- 9:45 a.m.: Chicago Purchasing Manager, est. 60.0, prior 61.1
- 9:55 a.m.: UMich Confidence, July final, est. 64.0, prior 63.8
- 10 a.m.: NAPM Milwaukee, est. 56.9, prior 59.3
- 1 p.m.: Baker Hughes rig count
- 3:15 p.m.: Fed’s Bullard, Lockhart discuss monetary policy in Wyoming
WHAT TO WATCH:
- Treasury contingency plan on debt is said to give priority to bondholders. Obama officials said to release plan no earlier than after the close of markets today.
- Spain faces Moody’s rating reduction from Aa2
COMMODITY HEADLINES FROM BLOOMBERG:
- Sugar Exports From India at Four-Year High May Cool Prices
- Sugar Falls as Surplus May Become Available; Coffee Advances
- Gold May Fall in London as Rally to Record Spurs Investor Sales
- Copper May Fall on Concern About Potential U.S. Debt Default
- Nickel Surplus to Narrow on China’s Demand, Sumitomo Says
- Gold May Repeat 1970-80 Bull Market on Europe Debt, U.S : Citi
- China May Boost Corn Imports to Record on Re-Stocking, Hog Herds
- Coffee May Decline 15% to Fibonacci Level: Technical Analysis
- BHP Chile Workers Vow to Prolong Strike at Biggest Copper Mine
- Gasoline Profit Doubling Cuts Naphtha to Asia: Energy Markets
- Vale Plans $3 Billion Dividend as Net Income Misses Estimates
- Gold May Decline as Rally to Record Spurs Sales, Survey Shows
- China Gold Demand May Surpass India This Year, Goldcorp Says
- Radiation-Free Food Bolsters South Korea’s Exports to Japan
- EUROPE: ring the gong; this Europig mess has nothing to do w/ Congress; straight down this wk across Europe b/c debt maturities ramp in AUG
- UK Jul house prices (0.4%) y/y vs consensus (0.9%) andn prior (1.1%)
- Germany June retail sales (1.0%) y/y vs consensus (1.8%), prior revised +3.1% from +2.2%
- France June consumer spending +1.2% vs consensus +0.5%, prior revised (0.3%) from (0.8%)
- France June producer prices (0.1%) vs consensus +0.1%and prior (0.5%)
- UK Jun mortgage approvals 48.4k vs consensus 46.0K
- EuroZone July flash CPI +2.5% vs consensus +2.7%
- ASIA ugly overnight with Taiwan down the most on a slowing economy and the TSMC miss
- Japan June core CPI +0.4% y/y vs cons +0.5%; overall household spending (4.2%) y/y vs cons (2.3%).
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