Risk Managed Long Term Investing for Pros
Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.
Takeaway: CCL today confirmed the European challenges we have been highlighting. It is responsible for revenue yield guidance not being raised.
- Carnival brand: Double digit improvement in ticket revenue yields
- Overcame European brand challenges from macro/geopolitical challenges
- We have been stressing European pricing as a risk
- Will deploy 4m cruise berths in 2016 in China
- China outboard travel expected to double in 2020
- Princess will be deployed in China in 2017
- China represents 5% of CCL's guests
- Onboard revenue +6% in constant dollars in F2Q
- Successful rollout of our casino engagement program, beverage packages and additional bandwidth are just a handful of examples of initiatives that drove onboard strength
- Remain on track for $70-80m savings
- Will step up marketing costs in 2H 2015
- Caution investors on ongoing macroeconomic and geopolitical risks not to get ahead of expectations for the year simply based on consistency and exceeding quarterly guidance.
- Remain committed on double-digit ROIC growth target.
- Beat driven by: better onboard/other yields, lower opex due to timing of costs, and better fuel/FX impact
- Capacity up 2% - NA (flat), EAA (+6%)
- Net ticket yield: +3.5%
- Improvement particularly strong in North America
- Net fuel/FX benefited F2Q by 10 cents
- FY 2015: anticipate $27m in restructuring costs, not included in guidance
- Bookings for next 3 quarters have been strong; volumes ahead at slightly lower prices
- At this point in time, cumulative fleet-wide bookings for the third quarter are well ahead at slightly lower prices but again driven by the unfavorable transactional currency impact.
- Caribbean itineraries are significantly ahead on occupancy at slightly lower prices, which bodes well for pricing on future bookings and pricing in the last six weeks has been higher.
- Alaskan itineraries are nicely ahead on both price and occupancy.
- All other North American brand deployments combine which includes the seasonal European program are highly ahead on occupancy but at lower prices which are being unfavorably impacted by transactional currency.
- For EAA brands, all itineraries combined are nicely ahead on price with occupancies that are in line with the prior year.
Q & A
- Why is the constant currency guidance unchanged despite the meaningful beat in the second quarter? Mostly Europe
- (Strong bookings there, which implies awful pricing)
- Costa having trouble with yields. Lots of macroeconomic difficulties in Europe.
- Pricing discipline in Caribbean: CCL will continue to try to put pricing integrity in and discipline in for our brands independently of what anyone else does.
- Advertising increases - not related to higher promotional spending
- 3.7% capacity increase in 2016; 1Q 2016 ahead on occupancy; cautiously optimistic on 2016
- Book load position: less inventory on bookings for rest of year
- We think it's impacted by shift of Wave Season by a couple of months
- Anticipate LNG will be fuel of choice
- Air/transportation: expect 20-25% improvement in costs
- Onboard yields have been strong on NA brands. Weaker in EAA brands.
- MERS impact: Have itineraries from China that touch Korea and have modified some itineraries
- Continue to see yield strength in China
- In the next 3-4 years, CCL should hit double digit yields
- Real competition for new cruisers is land-based
- CCL wants the competition to advertise and promote
- In the past, given $600m in advertising spend; this year will be 'few % points higher'
- Overall 1st time cruisers are up dramatically - part of it due to China, another part of it due to the Caribbean since there was so much capacity last year. The only way to fill those ships was to get a lots of new first time cruisers.
- New ship capacity: 6,600 is total capacity; passenger capacity is just north of 5,000
- No impact from China river boat incident
- Assumed onboard spend rising 2% in 2H 2015; more challenging comps in 2H 2015
- More dry docks in 2015 driving up costs by 2-3%. Expect dry docks to decline in 2016 (about half of 2015 increase will go away).
- European capacity up 6% in 2015 but nowhere near double digit Caribbean capacity increase last year. So can't blame it on capacity.
In this brief excerpt from today’s edition of The Macro Show, U.S. Macro analyst Christian Drake explains what role housing plays in the broader economic cycle.
Subscribe to The Macro Show today for access to this and all other episodes.
Subscribe to Hedgeye on YouTube for all of our free video content.
Takeaway: Head Scratching Offer for MSO. Retail Sales Decelerate as Summer Compares Get Tougher.
SQBG, MSO - Head Scratching Offer for Martha Stewart Living by Sequential Brands
Takeaway: At these multiples, 3.3x 2015E EV/Sales and 24x 2015E EV/EBITDA, we're scratching our heads trying to figure out what Sequential Brands thinks its buying. What we see is a company almost 100% dependent on the legacy of a soon to be 74 year old founder and media personality that has been permanently damaged, at least in the eyes of potential licensing partners after the whole M/JCP debacle. The thinking at SQBG has to be that it can layer MSO on to its existing platform, use the brand name to generate royalty revenue, and generate enough cash flow to justify the deal price. But there is serious key employee risk associated with this deal not to mention the fact that the Martha brand name is less relevant than it was five years ago, but far more relevant than it is likely to be in 2020.
Retail Sales Decelerate in Week 1 of Difficult 15-Week Summer Comps Stretch
Takeaway: On a 2yr, basis sales accelerated sequentially against a 4.1% reading last year. But, on a 1yr sequential basis there was a meaningful 40bps deceleration equating to the lowest growth rate we've seen in 2015 YTD. And we'd expect more of the same as weekly sales growth rates come under added pressure through September as we comp against a solid Summer of 2014.
M - Macy’s, Inc. to Redeem 8.125% Senior Notes Due 2035
FL - FootLocker launches video promotion with Under Armour, NBA
W - Wayfair plays a different marketing tune
NKE - Nike Ad Salutes Cleveland Fans Despite NBA Championship Loss
Alibaba Sells 11 Main
MERS Outbreak Hits South Korean Retail
GET THE HEDGEYE MARKET BRIEF FREE
Enter your email address to receive our newsletter of 5 trending market topics. VIEW SAMPLE
By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.