Cartoon of the Day: Redcoats And Rate Hikes

Cartoon of the Day: Redcoats And Rate Hikes - rate hike cartoon 10.28.2015


In case you missed it... Hedgeye CEO Keith McCullough and macro analyst Darius Dale hosted a LIVE + INTERACTIVE online event offering market commentary following the latest FOMC statement. McCullough also distilled the biggest global economic risks and explained how to position your portfolio going forward. Click here to watch the replay.


Panera Bread (PNRA) is on our Hedgeye Restaurants Best Ideas list as a LONG.


Yesterday after the market close PNRA reported 3Q15 numbers followed up by a conference call this morning at 8:30am ET.



Although PNRA missed on the top-line, in our eyes it was a solid performance overall, especially relative to some other companies that have already reported. PNRA represents one of our top ideas in the restaurant space and as you will see in the valuation section below, we see roughly 30% upside in the name, up to $240 per share.



PNRA reported revenue of $664.7mm versus consensus estimates of $667.6mm. Broken out by segment; sales for Bakery-cafés were $584.1mm versus consensus estimates of $585.6mm, Fresh Dough to Franchisees $46.3mm versus consensus estimates of $47.0mm, Royalties and Fees $33.7mm versus consensus estimates of $33.7mm.


System-wide same-store sales (SSS) were 2.8% versus consensus estimates of 3.0%, Company-owned SSS were 3.8% versus consensus estimates of 3.5% and lastly Franchise SSS came in well short of expectations, at 1.8% versus consensus of 2.5%. Breaking down the company-owned comp, PNRA saw 1.0% traffic growth and 2.8% check growth in the quarter. Transaction growth was up in every day part, pre-11am day part was up 1.7%, while the post-11am day part was up 0.7%. Traffic, although positive and well ahead of the industry average, was still short of consensus expectations, which were calling for a 1.6% traffic number. Notably, the company commented that in the first 27 days of Q4 comps at company owned restaurants were 3.4%


Moving to the bottom-line, PNRA reported EPS of $1.32 ex-items beating street expectations of $1.31 by $0.01.










  • As of 3Q15, the company had completed the conversion of 291 bakery-cafes to Panera 2.0, with 108 conversions completed during Q3, which is more than one per day
  • Catering grew by 12% in the quarter, evidence that the Hub investments are paying huge dividends for the company, management believes this will be a $1bn business over time
  • Consumer products is expected to grow to a $175mm business by the end of 2015, has grown at a 60% rate for the last four years
  • The widening divergence in the company-owned versus franchisee comp is evidence of the positive impact of initiatives such as Panera 2.0
  • Delivery is still in tests, big decisions to be made about whether it should be handled internally or through an outside party
  • Structural wage inflation and the affordable care act continue to be pressures, accounting for 110bps of deleverage in this quarter
  • Breakfast continues to grow faster than lunch and dinner, salad sales also increasing
  • Core G&A declined 4% in the quarter
  • 100% of artificial ingredients to be removed by the end of 2016, currently at 90%



Management reaffirmed full year 2015 guidance, of company-owned comparable SSS growth for FY2015 to be in the range 2.0 to 3.5%. Management is still targeting the conversion of approximately 300 company-owned bakery-cafes to Panera 2.0. Operating margins are still expected to be down 100 to 175 basis points. The company is still targeting 105 to 115 system-wide new bakery-café openings in fiscal 2015. In addition, the company reiterated EPS growth of flat to down mid- to high-single digits for the full year.



We believe that management has the company headed in the right direction and are executing well on key initiatives. With that, and our belief that they will continue to outperform their competition we reiterate our positive outlook for the company and its stock performance. We expect PNRA’s multiple to expand over time as investors and analysts see the viability of Panera 2.0, as it will greatly improve sales potential and profitability over time.



Please call or e-mail with any questions.


Howard Penney

Managing Director


Shayne Laidlaw



Don’t Believe the Fed’s ‘Serial Over-Optimism’

Don’t Believe the Fed’s ‘Serial Over-Optimism’  - Fed forecast cartoon 03.02.2015


As investors wait for the final denouement from the Fed today, we’re reminded of a slide from our Q4 Macro Themes deck about the Fed’s forecasting track record.


In short, don’t trust the Fed’s "dot plot."


Don’t Believe the Fed’s ‘Serial Over-Optimism’  - 10 28 2015 Fed dot plot


For folks putting too much stock in central planner sagacity, consider that the Fed’s “dots” suggest interest rates hikes will extend into 2018. No worries, if you believe the Fed's growth forecast out that far. Note that continued economic growth into 2018 would imply one of the longest expansions ever. 


Believe those dots at your own peril.


By our tally, the Fed’s GDP forecasts have consistently overestimated growth, every year over the past 5 years, to the tune of 100 basis points. You know where we stand, #GrowthSlowing and rates #LowerForLonger.


Editor’s Note: Hedgeye CEO Keith McCullough is hosting a LIVE + INTERACTIVE online event today at 2:10pm ET offering immediate market reaction and commentary on the Fed statement. Click here to listen in.

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Invite To Macrocosm: The Dock Debates

We are proud to present our first annual conference Macrocosm: The Dock Debates in Stamford, CT on Wednesday, November 18th from 12 - 7pm.  


Hedgeye CEO Keith McCullough will moderate five panels with experts on various macro topics including Currency Wars, Consequences of QE, Europe, Demographics and Healthcare. Panelists include David Einhorn, Jim Rickards, Michael Aronstein, Daniel Lacalle and Jurrien Timmer among others. Click here for the full roster and bios. 


Importantly, there will be ample time allocated at the end of each debate for interactive audience Q&A.


This event is off the record (i.e. not open to any media) and seating is limited so please contact sales at for pricing and availability.


Invite To Macrocosm: The Dock Debates - Macrocosm1

Hedgeye Was Short (And Remains Short) Twitter | $TWTR

Takeaway: It paid to listen to Hedgeye Internet analyst Hesham Shaaban on Twitter.

Twitter’s long-term growth prospects look increasingly suspect. Shareholders learned that lesson the hard way after the bell yesterday. The stock has fallen 7% after the social networking site reported declining “monthly average users.” In other words, fewer eyeballs viewing ads and lower revenue guidance.


Hedgeye Was Short (And Remains Short) Twitter | $TWTR - zz vv


The miss was no surprise to us here at Hedgeye. In fact, the bearish case on TWTR has been the mantra of Hedgeye Internet & Media analyst Hesham Shaaban since issuing his original Black Book on the stock, pre-IPO on Nov. 2013. 


Since then shares are down 30%.


Hedgeye Was Short (And Remains Short) Twitter | $TWTR - 10 28 2015 twitter chart


Hedgeye Was Short (And Remains Short) Twitter | $TWTR - 10 28 2015 keith twtr


Hedgeye Was Short (And Remains Short) Twitter | $TWTR - z vv


Here’s a small snapshot of a research update sent out to subscribers this morning.


Hedgeye Was Short (And Remains Short) Twitter | $TWTR - 10 28 2015 twitter note


And two recent HedgeyeTV videos of Shaaban laying out our bearish Twitter thesis.


The Crossroads: Here’s What Twitter Management Needs to Do, 9/3/2015


Why Twitter's Problems Run Deep, 6/15/2015


Editor's Note: If you’d like to learn more about our institutional research offerings or access our Twitter research please ping


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