Chipotle Expects Earnings To Drop By 35% In Wake Of The E. Coli Outbreak, Plus Porsche To Sell Electric Sports Cars

By 12.07.15

morning-brew

“This was an act of terrorism…The threat from terrorism is real, but we will overcome it. We will destroy ISIL.” — President Barack Obama, in a rare prime-time speech from the Oval Office on Sunday night addressing last week’s San Bernardino mass shooting and how the U.S. will fight to defeat ISIS.

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MARKET SNAPSHOT 


Job Creation Fuels Fed Conversation

  • U.S. stocks had a fantastic end to the week, gaining 2% across the board on the heels of a solid Friday jobs report. With 200,000 new jobs created in November and major growth in construction jobs, you’d better believe we’re on track for an interest rate hike later this month. Along with strong market performance came strong dollar performance, as the greenback gained against the euro as ECB President Mario Draghi hinted at increased quantitative easing (i.e. economic stimulus) measures.
  • On Friday, billionaire investor Carl Icahn disclosed a 12% stake in auto parts company Pep Boys, making him the company’s second largest shareholder. What are his plans? They’re centered around merging Pep Boys with his own auto parts company, Auto Plus, for “an excellent synergistic acquisition opportunity” (classic activist investor rhetoric from Icahn).
  • Asian markets were hit by selloffs Friday, as investors were evidently more disappointed by the Fed and ECB news than American investors.

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WORLD MACRO 

OPEC Clashes, Oil Plummets

With oil continuing to hover around $40 per barrel, many expected OPEC (aka the oil cartel that controls 80% of the crude market) to cut production to bring prices back up. Seems like the reasonable thing to do, right? Nope: at a meeting on Friday, behind oil powerhouse Saudi Arabia, the 13-member organization prohibited any caps on output. Why? With sanctions on Iran’s oil exports set to expire next year as part of its nuclear deal, Saudi Arabia expects its archrival to flood the market with supply—and it’s doing the same thing.

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CORPORATE PRIMER


  1. Coli Keeps Hammering Chipotle

    Yesterday, Chipotle publicly commented on the scope of its ongoing E. Coli outbreak, and the news was not tasty: Chipotle downgraded its earnings expectations by over 35% and is now predicting same store sales will fall by at least 8%. Naturally, hysteria broke around Wall Street, sending shares down around 7% and fueling speculation over the feasibility of Chipotle’s locally-sourced ingredient business model. Burrito-lovers everywhere are praying things work out.

    UAW’s Good Timing

    For the first time in a long time, there’s a story on Volkswagen that doesn’t involve its emissions scandal…but it’s still pretty much more of the same. Yesterday, the United Auto Workers union successfully forced a battered Volkswagen to concede collective bargaining rights like wages and benefits, setting a huge precedent for foreign-owned auto plant workers to gain these rights for the first time. The troubled car manufacturer still can’t catch a break, and the timing couldn’t have been worse.

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TODAY IN TECH


A Patent Battle for the Ages

War rages on between Samsung and Apple over one particularly pesky patent. This one dates all the way back to 2011, when Apple sued Samsung for $2.75 billion over alleged patent infringement, and Samsung fought right back by questioning the validity of the patent. Back to 2015: last week, a joint announcement by Apple and Samsung revealed that Apple will receive $548 million, but neither company is jumping for joy at the agreement. Samsung has been hinting at taking this one to the top—that is, the Supreme Court—over reimbursement rights. In other words, Samsung really wants its money back. This case will set the tone for future treatment of intellectual property, with Google and other tech giants taking front seats.

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OTHER STORIES

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ECONOMIC CALENDAR

  • Monday: H&R Block Earnings
  • Tuesday: Job Openings and Labor Turnover Survey; Krispy Kreme Doughnuts Earnings
  • Wednesday: Costco, Lululemon, Men’s Wearhouse Earnings
  • Thursday: Adobe Earnings; Weekly Jobless Claims; Import Prices
  • Friday: Retail Sales; Producer Price Index; Consumer Sentiment

WHAT’S IN YOUR FOOD

Enjoy the dining hall food at your university? Let’s hope so. With the cost of meal plans these days, you might as well be eating gourmet food every day (you might even save a few bucks in the process). Here’s more on exorbitant college meal plans, and why they cost so darn much:

  • Many colleges now require their students purchase a meal plan, including commuter students. Exhibit A: the University of Tennessee charges commuters $300 per semester for food they don’t eat—but that’s not bad compared to the $1,899 per semester that on-campus freshmen must shell out.
  • Think that’s steep? Some private schools can charge up to $3,000 for a meal plan per semester.
  • Where is all this money going? It doesn’t always just cover food: for example, the $300 charged to commuter students at Tennessee will go towards building a $177 million student union center.
  • Many schools are being persuaded by food vendors to hike up meal plan pricing: in exchange for a 20-year contract (that’s right, 20 years) with vendor Aramark, UVA got a $70 million contribution, plus $19 million in renovations. Where’s all that money coming from? Oh, that’s right: you and me.

INTERVIEW QUESTION OF THE DAY

How do you value a company? (Answer #1)

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BUSINESS TERM OF THE DAY

Named Fiduciary — The fiduciary that holds responsibility over a given financial account. The named fiduciary is responsible for operating and administering a qualified retirement plan under the Employee Retirement Income Security Act (ERISA), which is meant to protect participants in private-sector retirement plans. The named fiduciary is required to act in the plan participants’ best interests.

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FOOD FOR THOUGHT
44.9: percentage of U.S. adults who worked for an employer at least 30 hours per week in November, as measured by Gallup’s Good Jobs rate.

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