RESTAURANT INDUSTRY – SHORT INTEREST, CPKI, AND MORE

The restaurant space is seeing a rise in short interest despite activism and buyout rumors.

 

With a group of investment bankers working overtime to sell the company, CPKI’s second preannounced results for 2Q10 were a little better than the first.  The recent release detailing 2Q10 results showed improved EPS in a range of $0.15 to $0.17 (vs. prior guidance of $0.10 to $0.15 given on 6/21/10 - down from the original guidance of $0.24 to $0.26 communicated on 5/6/10).

 

2Q10 same-store sales came in at -5.9% (vs. prior guidance of -6.0% to -7.0%) and 3Q10 same-store sales through July 11th improved to -0.6%, according to management.  This significant sequential improvement is partly attributable to the fact that the company’s 2Q10 results were negatively impacted from lapping the strong results from last year’s Thank You Card Program which ran during 2Q09 and benefited comps by about 1.4%.  CPKI will be launching the program again during the third quarter on July 28.

 

Notably, CPKI was one of the restaurant stocks with the biggest increases in short interest over the past month.  Other notable increases in short interest ahead of earnings season are BWLD, EAT and RRGB. 

 

RRGB is being pressured by an “activist” as the fundamentals continue to be severely challenged for the company.  Pressing the short here is not a good bet from a risk/reward perspective. 

 

JMBA has seen short interest accelerate to the upside ahead of news detailed in The Wall Street Journal today.  An article titled, “McDonald’s Smoothie Launch May Juice Up Entire Category” discusses the launch of McDonald’s smoothies nationwide and the impact on the smoothie category.  Jamba Juice Chairman and CEO James White said, “their advertising will expand interest in the category”.

 

We will be releasing our restaurant Industry “sigma” positioning by the end of the day, but BWLD is currently operating in the quadrant we call “Trouble Brewing.”  I continue to believe that there are several issues that will plague the company for some time.

 

Over the past month, EAT saw the third biggest increase in short interest at 31.9%.  As a percentage of the float the absolute short is still low at 7%, but it’s up 1.68% in the last month.  Over the weekend, Barron’s described the CEO of DIN as a canny operator, but she is doing nothing of consequence to alter the operation within the four walls of the Applebee’s concept.  The company’s ability to do anything other than sell off stores is limited by the leveraged balance sheet.  This offers an ongoing market share opportunity for EAT.

 

Brinker is on the other side of the table with enough liquidity to buy back 20% of the equity value of the company and is making big strides to improve restaurant level margins and the overall guest experience.  Apparently, the market likes leverage more than cash!  Over the past month EAT is down 5.8% and DIN is up 2.6%.

 

RESTAURANT INDUSTRY – SHORT INTEREST, CPKI, AND MORE - short interest

 

Howard Penney

Managing Director


Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more

Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more

Energy Stocks: Time to Buy the Dip? | $XLE

What the heck is happening in the Energy sector (XLE)? Energy stocks have trailed the S&P 500 by a whopping 15% in 2017. Before you buy the dip, here's what you need to know.

read more

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more