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BYD 4Q PREVIEW

BYD Q4 looks like a beat.  Will the sell side finally give this stock a break?

 

 

As always, BYD is pretty low on the list of what’s ‘sexy’ in gaming right now, and maybe that’s why we like it.  In a slow but steady US GDP growth environment, we believe Las Vegas – both the Strip and Locals – could surprise on the upside in 2012. 

 

For Q4, BYD could beat pretty handily.  We’re projecting $115 million in EBITDA and the Street is only at $111 million.  Even our number may be conservative.  Our EPS estimate is $0.01.  This should be the first YoY increase in EPS since Q3 2007.  We think management will be positive on 2012 during the conference call, particularly about the LV Locals market which finally may start to show consistent, albeit slow, growth going forward.

 

BYD is definitely not a consensus long call.  Most analysts have Neutrals, Holds, and Sells on the stock.  JPM and Lazard recently downgraded it due to Atlantic City concerns, right before New Jersey released strong December numbers.

 

 

Model details:

 

We estimate that BYD will report $583MM of revenues and $115MM of EBITDA in 4Q11.

  • Las Vegas locals revenue will be down just -0.5% YoY to $151MM and EBITDA will increase to $35MM due to a 2% YoY reduction in operating expenses.
    • 4QTD Locals revenue has been up 6.8% but due to an accounting peculiarity in the Nevada Gaming Commission reporting, December will likely be down.  
  • Downtown revenue of $58MM and EBITDA of $11MM
  • Midwest & South revenue of $197MM and EBITDA of $39MM – which includes $27MM of revenues and $8MM of EBITDA from Imperial Palace
  • Borgata revenue of $174MM and EBITDA of $40MM

Other assumptions:

  • $10MM of corporate expense
  • $35MM of D&A
  • $2MM of share based comp
  • $1MM of deferred rent
  • $40MM of interest expense

REPLAY PODCAST & SLIDES: 1Q12 KEY MACRO THEMES

HEDGEYE 1Q12 KEY MACRO THEMES

REPLAY PODCAST & SLIDES

January 11, 2012

 

Valued Client,
 

Earlier today, Hedgeye's Macro Team, led by CEO Keith McCullough and DOR Daryl G. Jones, hosted their quarterly themes conference call. In addition to another lively and robust Q&A session, the core topics included: 

  • Strong Dollar = Strong Consumption: Our King Dollar thesis continues to strengthen and with it the outlook for U.S. consumption, roughly 70% of GDP, and U.S. consumption-related equities.
  • Deflating the Inflation II: Alongside the strengthening of the King Dollar and the continued high inverse correlation of commodities to the U.S. dollar, we expect to see commodity inflation continue to subside. Winners include: domestic and international consumers. Losers include: commodity producers and emerging market currencies as their central banks ease monetary policy.
  • Growth Slowing's Bottom: One standard bearer of global macro markets is that they revert to the mean.  As economic growth bottoms out, certain equity markets, notably China, Germany, and the U.S., look set to outperform.

To access the replay podcast, please copy/paste the link below into the URL of your browser:

https://app.hedgeye.com/feed_items/17715-q1-macro-themes

 

To access the accompanying slide presentation, simply click on the following link:

"Q1 2012 THEMES"

 

Please contact if you have any questions.  

 

Best regards,

 

The Hedgeye Macro Team


CAKE: LOOKING AHEAD TO 4Q EARNINGS

We were cautious on The Cheesecake Factory’s prospects for 2011 for much of last year.  Approaching 4Q earnings, we think expectations are in line. 

 

The Cheesecake Factory has been downgraded by several sell-side firms in the last few months.  Our bearish stance on the stock hinged on two factors: overly optimistic company outlook on commodity costs in 2011 and consensus estimates being too high for the year.  During the third quarter, both of those factors changed as management revised its guidance on commodities and the street lowered expectations.  Sentiment duly followed the stock price but, at this juncture, we believe that the fourth quarter is likely to be strong for the company.  Furthermore, the likeliness of commodity inflation surprising the Street has been reduced; we believe that on the short side heading into earnings, the risk outweighs the reward.

 

CAKE: LOOKING AHEAD TO 4Q EARNINGS - cake sentiment

 

 

One chart we would like to highlight pertaining to the top-line is below: CAKE system same-store sales versus the ICSC Chain Store Sales Index.  The correlation between the two data sets is +0.8.  Given that consumer metrics in general, not only the ICSC Chain Store Sales Index, have been indicating quite healthy levels of spending, it is difficult to be bearish on CAKE’s top-line prospects.  CAKE is a beneficiary of traffic in malls and the strong dollar as much as any other player in the space.  Our firm’s macro call has been Strong Dollar = Strong Consumption and that applies to CAKE as well.

 

CAKE: LOOKING AHEAD TO 4Q EARNINGS - cake comps vs icsc

 

 

Another strong aspect of CAKE’s top-line story is its growth profile.  The smaller format of restaurant that the growth is weighed towards is offering higher returns and productivity (north of $1k/square foot).  From a guidance perspective, we expect continuing positive tone around this point.  

 

While our estimate for 4Q EPS is coming in slightly below the Street’s at $0.51 versus $0.52, we believe that the top-line will overshadow any other concerns.  The company continues to generate free cash flow (~$130m through the first three quarters) and is using the majority of that to buy back shares.

 

 

 

Howard Penney 

Managing Director

 

Rory Green

Analyst


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Q1 2012 MACRO THEMES AND PRESENTATION

Valued Client,
 
5-10 minutes prior to the 11AM EST start time today please dial:

(Toll Free) or (Direct)
Conference Code: 958997#
  

Materials:"Q1 2012 THEMES"

                 
To submit questions for the Q&A, please email .

****************************************************************************** 


Q1 THEMES & PRESENTATION:

STRONG DOLLAR = STRONG CONSUMPTION, DEFLATING THE INFLATION II & GROWTH SLOWING'S BOTTOM

 

Topics will include:

   

  • Strong Dollar = Strong Consumption - Our King Dollar thesis continues to strengthen and with it the outlook for U.S. consumption, roughly 70% of GDP, and U.S. consumption-related equities.
  • Deflating the Inflation II - Alongside the strengthening of the King Dollar and the continued high inverse correlation of commodities to the U.S. dollar, we expect to see commodity inflation continue to subside. Winners include: domestic and international consumers. Losers include: commodity producers and emerging market currencies as their central banks ease monetary policy.
  • Growth Slowing's Bottom - One standard bearer of global macro markets is that they revert to the mean.  As economic growth bottoms out, certain equity markets, notably China, Germany, and the U.S., look set to outperform.

 

ABOUT HEDGEYE

Hedgeye Risk Management is a leading independent provider of real-time investment research. Focused exclusively on generating and delivering actionable investment ideas, the firm combines quantitative, bottom-up and macro analysis with an emphasis on timing. The Hedgeye team features some of the world's most regarded research analysts - united around a vision of independent, uncompromised real-time investment research as a service. For a complete listing of our sector head bios, please click here: https://www2.hedgeye.com/pages/team

 

Please contact if you have any questions.  

Regards,

   

 

The Hedgeye Sales Team

 
HEDGEYE RISK MANAGEMENT                                                       
111 Whitney Avenue
New Haven, CT 06

www.hedgeye.com
 


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