Doug Kass shares his views every day on RealMoneyPro. Click here for a real-time look at his insights and musings.
I'm Ready to Order a Larger Starbucks Short
Starbucks (SBUX) reported in-line U.S. comps after the bell yesterday as part of its quarterly earnings report, but same-store sales in emerging markets were disappointing. The coffee giant's Mobile Order App also failed to drive sales growth (as was expected).
SBUX remains a portfolio short of mine.
It's my view that if a consumer slowdown takes hold (in part because of the "negative wealth effect" of lower stock prices), price elasticity will finally begin to adversely impact the chain's domestic comps. That would probably produce a downturn in this popular, highly valued stock.
I covered most of my SBUX short when the shares were down $3 during Wednesday's market schmeissing. But I plan to short any strength on the stock if SBUX rallies from here.
FITB Still Be Fit to Me
Fifth Third Bancorp (FITB) reported in-line recurring earnings of $0.40/share yesterday morning, but the stock initially declined based principally on higher near-term guidance for things like technology and compliance costs (although shares are up a bit today).
Other metrics -- net interest margin, net chargeoffs, average loan growth, etc. -- were all in line.
FITB reported that its energy loans total approximately $1.7 billion, consisting of 45% reserved-based loans, 19% midstream, 18% oilfield services, 13% upstream and 5% downstream. The bank's reserves for these loans total a relatively high 5% of the energy book, and will probably rise by one percentage point in 2017.
For the full year, FITB sees about 5% expense growth year over year -- double the previous expectations. That led to a slight reduction in analysts' consensus 2016 earnings-per-share forecast, although there's little impact to the out years because the bank guided to 2%-or-lower expense growth.