The Call @ Hedgeye | Tuesday, February 27, 2024 [REPLAY]

Watch the replay Below

TICKERS DISCUSSED LONGS: ACI, MGM, BYD, CCL, RCL, CRI, AZO, AHR, MSFT SHORTS: KR, XHR, JWN, LOW, LAD, PDCO, DFS, COF, BMO, CHTR NEUTRAL: NCLH, M, UNH

broadcast summary 

Consumer Staples: Daniel Biolsi - 00:01:09

• Short – Kroger Co. (KR) & Long – Albertsons Companies, Inc. (ACI): FTC filed a lawsuit to prevent the merger between Kroger and Albertsons; we will be hosting a Flash Call today at 12:30pm ET with our Legal Catalysts analyst Paul Glenchur; a lot of food retailers would be impacted if this goes through; KR remains a short & ACI remains a long.

Gaming, Lodging & Leisure: Sean Jenkins - 00:05:20

• Regional Gaming: January data came in much weaker than expectations; majority of the softness came during tougher weather periods; we think the industry can narrowly accelerate in GGR terms; rate of change looks stronger for domestic regional casinos; MGM Resorts International (MGM) remains a long & Boyd Gaming Corporation (BYD) remains on the long bench.
• Short – Xenia Hotels & Resorts, Inc. (XHR): Very slight beat; none of the beat came from operations on the hotel side; mid-point of their guidance was 1.5% above current consensus; the cost growth they are going to have is likely going to erode potential margin expansion; XHR remains a short.
• Norwegian Cruise Line Holdings Ltd. (NCLH): Read through for Carnival Corporation (CCL) & Royal Caribbean Cruises Ltd. (RCL); NCLH put up an in-line Q4; Q1 guidance is 40% above current Street expectations on the EBITDA line; guidance for the full year was a bit more in-line with what we were expecting; they will have a solid year on the EBITDA line; CCL & RCL remain longs.

Retail: Brian McGough and Jeremy McLean - 00:13:15

• Long Bench – Carter's, Inc. (CRI): Beat the quarter and guided down Q1; earnings are accelerating, up 21% in Q4; the stock looks good on signal strength; CRI remains on the long bench.
• Macy's, Inc. (M): Acting like it's not being acquired; beat the quarter; took a massive guide down in Q1; Macy’s is closing 150 stores; this is bearish for Nordstrom, Inc. (JWN) which remains a short for us.
• Short – Lowe's Companies, Inc. (LOW): Reported an in-line quarter but guided down comps and earnings for the year; EPS was 5% below the Street; we see another 50 cents in earnings downside; LOW remains a short.
• Long Bench – AutoZone, Inc. (AZO): Beat earnings; revenue was in-line; tailwinds to their demand continue; AZO remains on the long bench.
• Short – Lithia Motors, Inc. (LAD): Acquired Carousel Motor Group; we’ve been talking about the risk around their acquisition strategy; overly aggressive M&A strategy in a declining used and new auto market; LAD remains a short.

Health Care: Tom Tobin - 00:23:57

• New Short – Patterson Companies, Inc. (PDCO): We have a robust process that looks through their internal growth rate across multiple consumption metrics; also tracking cell phone data on dental offices and vet clinics; missed and guided slightly lower for the 2nd half; vet and dental continue to remain weak; PDCO is now a best idea short.

Healthcare Policy: Emily Evans - 00:27:17

• UnitedHealth Group Incorporated (UNH): Change Healthcare was acquired by UnitedHealth back in 2022; Change Healthcare was known for streamlining the claims system in the drug channel; Change Healthcare has been seized by a cyber attack for 4 days now; the attack has been linked to a group in Russia.

Macro, Housing & Financials: Josh Steiner - 00:31:14

• Consumer Credit: On Thursday we will be hosting a consumer credit deep dive providing an updated outlook on consumer credit relative to all the credit card companies; massive merger announced in the space last week; CFPB is set to issue a rule making decision on late fees and potentially capping them in the credit card space; could reduce late fees by ~75%; Discover Financial Services (DFS) & Capital One Financial Corporation (COF) remain shorts.
• Short – Bank of Montreal (BMO): Missed on earnings → down 16% YoY; missed across the board; non-interest income missed; operating expenses missed; BMO remains a short.

REITs: Rob Simone - 00:38:27

• Long – American Healthcare REIT, Inc. (AHR): We hosted our Long AHR Black Book yesterday; this is the only long we have in the healthcare REITs space; this is a recent IPO as of 3 weeks ago; SHOP exposure allows the REIT to own the EBITDA or cash flow after rent; AHR remains a long.

Communications & Software: Andrew Freedman - 00:45:03

• Short – Charter Communications, Inc. (CHTR): Yesterday there were headlines that Charter is looking to acquire Altice; Altice is likely shopping themselves around to stave off a potential bankruptcy; this is a bearish sign for Charter especially in light of recent broadband subscriber losses; this deal wouldn’t solve any of their problems; CHTR remains a short.

Global Technology & Software: Felix Wang - 00:56:38

• Lenovo: Unveiled a transparent display laptop; camera can be used to identify objects behind the screen display.
• Long Bench – Microsoft Corporation (MSFT): Microsoft took a minority stake in a French AI company called Mistral; MSFT is giving customers more options other than OpenAI; MSFT remains on the long bench.

Telecom-Media Policy: Paul Glenchur - 01:01:19

• Social Media: Yesterday after 4 hours of oral arguments at the Supreme Court, the court appears hostile to the idea of these state laws regulating the content moderation of social media companies.

Macro Policy: JT Taylor - 01:08:01

• Congress: Meeting at the White House today; Speaker Johnson has to figure out what he is going to do with House Republicans; could be heading toward a government shutdown.