Despite easy comps, August is coming in pretty weak.  At the very least, Q3 won’t be a repeat of Q2.  



As we mentioned in our note, “REGIONALS: SHOW ME THE GROWTH, MO" (9/6/11), preliminary revenue data from Missouri may indicate a soft August for the riverboat markets.  So far this year, we have three states that have reported August revenues:

  • Illinois same-store gaming revenues down 11% against an August 2010 comp of –6%
  • Iowa same-store gaming revenues down 1% versus –3% last year
  • Indiana revenues down 5% versus –1% last year
  • Even Pennsylvania – which we wouldn’t have characterized as mature yet – fell 6% this August in same-store gaming revenues

One fewer Sunday can’t explain the August weakness.  Nor can a difficult comp, since regional gaming revenues (riverboat) fell 2% in August of 2010.  So what’s going on?  We think it is mostly macro.  Gaming proved to be one of the most, if not the most cyclical consumer sector in the last downturn.  Statistically, housing prices and unemployment have been the most significant drivers of gaming revenues.  Unfortunately, housing prices are still declining and unemployment remains above 9%.  Looking through this lens, we shouldn’t be surprised.


For the first time in many quarters, we don’t see widespread earnings upside for domestic gaming operators.  In fact, some are at risk of missing including ASCA, PENN, and BYD.  We still think PNK has enough secular margin improvement and Louisiana exposure to put up another beat but the size of that beat may not be what investors are used to.  Sentiment is likely to turn, in our opinion. 


PENN looks particularly vulnerable since it has widespread exposure (more negative data points) and more downside to its trough valuation.  Estimates for PENN’s PA casino are also looking high given the surprising and severe slowdown there.  Finally, being a Wall Street darling now could be a liability on the way down.


The following charts analyze regional gaming revenues on a sequential basis.  From this view, the regional performance looks even worse.  Depending on the state, sequential performance began to deteriorate in May, June, or July and all three states depicted underperformed again in August.







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

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more