Being a Loser

“Show me a good loser, and I’ll show you a loser.”

-Vince Lombardi


Losing sucks and there is basically not much to debate beyond that.  In the investment world, losing means you lose both your family and client’s hard earned capital.  It’s almost a double whammy in terms of managing the emotions related to losing in that sense.  If it were just you losing an individual tennis match at the country club, that’s probably cool on some level.  But when you make a bad investment, you actually have to put the accountability pants on and answer to both your clients and your family. 


Losing is also part of the big boy’s game of being a professional stock market operator.   We lose, we analyze the loss, and then we adjust and improve.  Or, at least, that is how it is supposed to work.  In reality, though, most investors, and people generally, tend to overweight and over-emotionalize their losses.  While winning is great, losing is painful.   This occurs in part to our culture where losing, to Lombardi’s point above, is broadly characterized as a bad thing.  I’m here to tell you it’s not.  In fact, losing is a chance to improve.


This morning Spain sold €2.54 billion of 2 and 10-year bonds.  On one hand, Spain won.  They sold more than the maximum target of €2.5 billion.  As well, the bid-to-cover was 2.42 versus 2.17 in the last auction in January.  Yields, on the other hand, have ticked up since January from 5.4% on the 10-year to 5.74% in this auction.  (Incidentally, the actual market yield is higher.)  But, still, mostly a win, right?


Well, not so much.  The European sovereign debt market is hardly a market anymore.  Government intervention is enabling these auctions to be “successful”, but the stark reality remains that the monetary union has failed.  The key evidence of this is in interest rate differentials.  In the Chart of the Day, we show the spread between Germany and Spain interest rates going back three years.  In a successful monetary union, the rates at which the key players sell sovereign debt would be comparable.  Unfortunately, at least for monetary union enthusiasts, this is not the case in Europe.


The more unfortunate fact in Europe is that while the market is attempting to do its job and price sovereign debt according to appropriate sovereign risk, there is no currency mechanism to adjust and aid these beleaguered sovereigns.  In theory, what should be happening is that the Spanish currency should naturally adjust to reflect its weak fiscal and economic situation, which then, over time, would boost Spanish exports and subsequently boost the Spanish economy as Spain’s goods become cheaper. 


Unfortunately, Spain, and really all nations in the Eurozone, has a currency that reflects the strongest members, but doesn’t have the commensurate ability to borrow at low rates.  In effect, the weaker economic nations in the Eurozone are all structural losers.  So, then, it should be no surprise that the Socialists are about to take over the government of France.

As an aside, my favorite quote about socialism comes from Winston Churchill, who said:


"The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries." 


It is sad that the structural issues of the Eurozone are forcing the people of the France to choose the equal sharing of misery via socialism versus rolling the proverbial bones on the upside of capitalism.


Although Keith is on a much deserved vacation this week, he was kind enough to flag to me the fact that both copper and long term yields in the U.S. continue to signal an ominous outlook for global growth.  Copper has basically been going down in a straight line over the past thirty days.  Meanwhile, the 10-year yield on U.S. Treasuries remains below our key line of resistance at 2.04%.  Call it reflexivity if you will, but typically these two market prices are good leading indicators for the direction of economic activity.  


You may not believe Chinese officials when they say they will temper growth, and you may not believe the tempered growth numbers from China when they get reported, but the price of copper does not lie.  I can tell you the shareholders of Freeport McMoran (FCX) are starting to believe it.  FCX, one of the world’s largest copper miners, is down 20% in a straight line since February 1st, despite trading at less than 5x trailing earnings.


Speaking of earnings, our retail Sector Head Brian McGough did an excellent job summarizing his views of earnings for retail this quarter.  While the full note can be found at ( ), the key takeaway was as follows:


“a)      The current consensus earnings growth forecast for the next 12-months is 23%. We have not seen this kind of growth since we came off of recessionary earnings numbers in 2010.


b)      The market is giving this earnings growth a 17x p/e. We’ve only seen that kind of multiple five times in 3-years, but always at times when the group was still clearly under-earning. Who are we to say that it is NOT under-earning today? But to make this case, we need to see a considerable upshift in consumer spending alongside another decline in raw materials costs. We don’t like that call.”


To paraphrase Brian, I think he is saying that the asymmetric risk / reward in retail is not tilted towards the upside in retail land this earnings season.


But enough about losing, go out there and get wins on the board today!


The immediate-term support and resistance ranges for Gold, Oil (Brent), US Dollar Index, Japanese Yen (vs USD), Euro/USD, and the SP500 are now $1, $116.91-120.45, $79.23-79.64, $81.11-82.31, $1.30-1.32, and 1, respectively.


Keep your head up and stick on the ice,


Daryl G. Jones

Director of Research


Being a Loser - Chart of the Day


Being a Loser - Virtual Portfolio

Leaders Ask Questions

This note was originally published at 8am on April 05, 2012. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“They answered questions nobody had yet asked.”

-Nassir Ghaemi


In August of 2011, The New York Times reviewed a fascinating psychology book I am reading right now – A First-Rate Madness, by Nassir Ghaemi. The title of the NYT article was well timed, “What Befits a Leader In Hard Times?” Good question.


As most of you who follow Global Macro country, currency, and commodity markets will recall, by September of last year, most things that were down hard yesterday were crashing. If it was your money that someone else put at risk in Q1 of 2011, they were hard times.


Leaders ask hard questions. You don’t have to be in the business of Risk Managing other people’s money to get that. Neither do you have to go to business school. All you need to do is be held accountable to every penny in your company’s account or point on the scoreboard.


Back to the Global Macro Grind


“For leaders in any realm, creativity is not just about solving old problems with new solutions, it’s about finding new problems to solve.” (A First-Rate Madness, page 38).

  1. Old Problems: housing, unemployment, fraud.
  2. New Problems: growth, inflation, policy.

That’s right, it’s The Policy, Stupid. I don’t have to be in bed with Bill Clinton to understand a simple marketing message like that. Away from his shady extra-curricular activities, there’s a lot the man was able to accomplish from both a leadership and growth perspective. Raging Republican fans will agree that Ronald Reagan was a leader who asked the right basic economic questions too.


Being a Canadian-American who will vote for neither of these conflicted and compromised US political parties (both Bush and Obama were Keynesians in their economics; that’s why the net jobs added in America in the last decade = ZERO and GDP has averaged 1.7%), I think there is a tremendous opportunity in this country to simplify a solution to our New Problems:


Strong Dollar = Strong America. Period.


Now before Keynesian Export geeks go haywire (fyi, devaluing your currency to “boost” exports is a broken solution to an Old Problem – no country in world history has devalued its way to long-term economic prosperity), check out my Chart of The Day again. Then look at it again  - and again, and “Again!” (channeling my Herb Brooks to Bernanke and Geithner):

  1. 1983-1989 (Reagan): US Dollar Index average = $115.18; Oil price average = $22.16/barrel; US GDP average = 4.31%
  2. 1993-1999 (Clinton): US Dollar Index average = $92.93; Oil price average = $18.63/barrel; US GDP average = 3.84%

The US Economy (and, increasingly, the Global Economy) runs on Consumption Growth. In terms of US GDP, that’s 71% of the number. If you Deflate The Inflation (via Strong Dollar), you’ll ramp real (inflation adjusted) Consumption Growth.


Don’t be afraid of this idea because it’s new – the US Dollar Index is currently at $79.81, so you have no idea (neither do I) how well this idea could actually work.


Embrace it. And Try it. Because I can guarantee you that if Oil goes to $22, $42, or even $62 tomorrow, Americans, Canadians, and Europeans alike are going to have one hell of a summer party.


Who will this upset? Let’s ask some simple questions:

  1. If the American, Canadian, and European Saver and Consumer get paid via Strong Dollar, who doesn’t?
  2. If the Chinese, German, and Brazilian cost of goods sold (raw commodities) go down via Strong Dollar, what goes up?
  3. If the stock, bond, currency, and commodity markets of the world stop trading on what the Fed does, who loses?

I could take a full year off from waking up at 4AM to write you these morning missives and write a pretty snazzy Ph.D thesis on this. But, if I do that, this opportunity to lead and change the world will have passed me by. I’m a critic of Dollar Debauchery, but I also have a solution.


Yesterday was the 2ndlargest down day (-1.02%) for the US stock market in 2012. US Equity Volatility (VIX) is up almost +20% in a straight line from where the VIX has bottomed, multiple times, since the US debt, leverage, and fraud peak of 2007.


If you look at the US stock market Sector Studies for April to-date, all that glitters is no longer Gold:

  1. Energy (XLE) = down -7.8%!
  2. Basic Materials (XLB) = down -3.2%
  3. Industrials (XLI) = down -2.7%

In other words, as Growth Slows Globally, the Old Solution (Easy Money) to Old Problems (Housing, Unemployment, Fraud) isn’t a long-term solution at all. The New Solution (Strong Dollar) to New Problems (Growth, Inflation, Policy) may be tough for many of the conflicted, compromised, and constrained (answers to questions 1-3) to accept. But that is precisely the point.


Asking 90% of those people (Presidents, Prime Ministers, CEOs, etc.) why getting them paid by short-term Policies To Inflate is good for long-term growth and economic prosperity remains The Question that no leader in this country has yet had the courage to ask.


My immediate-term support and resistance ranges for Gold, Oil (Brent), US Dollar Index, and the SP500 are now $1626-1663, $121.67-124.76, $79.21-80.06, and 1393-1408, respectively.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Leaders Ask Questions - daily


Leaders Ask Questions - VP 4 5


TODAY’S S&P 500 SET-UP – April 19, 2012

As we look at today’s set up for the S&P 500, the range is 16 points or -0.52% downside to 1378 and 0.64% upside to 1394. 












  • ADVANCE/DECLINE LINE: on 4/18 NYSE -1015
    • Down from the prior day’s trading of 1632
  • VOLUME: on 4/18 NYSE 720.97
    • Increase versus prior day’s trading of 1.58%
  • VIX:  as of 4/18 was at 18.64
    • Increase versus most recent day’s trading of 0.98%
    • Year-to-date decrease of -20.34%
  • SPX PUT/CALL RATIO: as of 04/18 closed at 2.74
    • Increase from the day prior at 1.41 


  • TED SPREAD: as of this morning 40
  • 3-MONTH T-BILL YIELD: as of this morning 0.07%
  • 10-Year: as of this morning 1.99
    • Up from prior day’s trading of 1.98
  • YIELD CURVE: as of this morning 1.72
    • Increase from prior day’s trading at 1.71 

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30am: Jobless Claims, est. 370k (prior 380k)
  • 9:45am: Bloomberg Consumer Comfort
  • 10am: Philadelphia Fed, April, est. 12.0 (prior 12.5)
  • 10am: Existing Home Sales, March, est. 4.62m (prior 4.59m)
  • 10am: Leading Indicators, March, est. 0.2 (prior 0.7%)
  • 10am: Freddie Mac 30-yr mortgage
  • 10:30am: EIA natural gas
  • 1pm: U.S. to sell $16b 5-yr TIPS 


  • IMF, World Bank spring meetings continue
  • Treasury Secretary Timothy Geithner attends G-20 meeting of finance ministers, central bank governors at IMF to discuss global recovery, policies to ensure stability in Europe
  • G-20 economic, trade ministers meet in Mexico
  • House, Senate in session:
    • House Armed Services Committee hears from Defense Secretary Leon Panetta and Joint Chiefs Chairman Martin Dempsey on security in Syria. 10am
    • House Oversight subcommittee holds hearing on IRS. 11am 


  • Sales of previously owned U.S. homes probably increased in March, economists est.
  • Spain and France sell debt as yields increase
  • GSK makes unsolicited offer for Human Genome for $13-shr cash
  • Johnson & Johnson win European approval to buy Synthes for ~$21b
  • Ford Motor to build $760m assembly plant in China to double Chinese output to 1.2m vehicles
  • Research in Motion said near a choice to pick strategy adviser; JPMorgan the leading candidate
  • Southern Co.’s plans to build 2 nuclear plants in Georgia may be blocked by opponents
  • Sony-led group will win EU approval for its $2.2b purchase of EMI’s publishing unit today, FT reports
  • Cable & Wireless plunges after Tata pulls offer; Vodafone has deadline today to make firm bid
  • Ackman’s Pershing Square plans IPO of new fund for Jan. 2013, FT says
  • MF Global trustee seeks $700m through lawsuit in U.K. 


    • BB&T (BBT) 6 a.m., $0.58
    • Dupont (DD) 6 a.m., $1.53
    • Danaher (DHR) 6 a.m., $0.71
    • Diamond Offshore Drilling (DO) 6 a.m., $0.99
    • UnitedHealth Group (UNH) 6 a.m., $1.18
    • Nokia (NOK) 6 a.m.
    • Fifth Third Bancorp (FITB) 6:30 a.m., $0.36
    • Keycorp (KEY) 6:30 a.m., $0.19
    • EMC (EMC) 6:45 a.m., $0.36
    • Laboratory of America Holdings (LH) 6:45 a.m., $1.67
    • Philip Morris International (PM) 6:59 a.m., $1.19
    • Southwest Airlines Co (LUV) 7 a.m., $(0.05)
    • Bank of America (BAC) 7 a.m., $0.12
    • Baxter International (BAX) 7 a.m., $1.00
    • Boston Scientific (BSX) 7 a.m., $0.08
    • First Horizon National (FHN) 7 a.m., $0.13
    • Travelers Cos /The (TRV) 7 a.m., $1.52
    • People’s United Financial (PBCT) 7 a.m., $0.18
    • Morgan Stanley (MS) 7:15 a.m., $0.44
    • Alliance Data Systems (ADS) 7:30 a.m., $2.19
    • Rockwell Collins (COL) 7:30 a.m., $1.09
    • Verizon Communications (VZ) 7:30 a.m., $0.58
    • Fairchild Semiconductor International (FCS) 7:30 a.m., $0.04
    • First Niagara Financial Group (FNFG) 7:30 a.m., $0.19
    • Peabody Energy (BTU) 8 a.m., $0.56
    • Freeport-McMoRan Copper & Gold (FCX) 8 a.m., $0.87
    • Sherwin-Williams (SHW) 8 a.m., $0.94
    • Union Pacific (UNP) 8 a.m., $1.63
    • Cypress Semiconductor (CY) 8 a.m., $0.09
    • PPG Industries (PPG) 8:11 a.m., $1.78
    • Blackstone Group (BX) 8:30 a.m., $0.40
    • New York Times (NYT) 8:30 a.m., $0.02
    • Genuine Parts Co (GPC) 8:44 a.m., $0.87
    • Nucor (NUE) 9 a.m., $0.39
    • Chipotle Mexican Grill (CMG) 4 p.m., $1.93
    • NCR (NCR) 4 p.m., $0.38
    • Freescale Semiconductor (FSL) 4 p.m., $(0.06)
    • Chubb (CB) 4:01 p.m., $1.52
    • Hanesbrands (HBI) 4:01 p.m., $(0.33)
    • Capital One Financial (COF) 4:05 p.m., $1.39
    • E*TRADE Financial (ETFC) 4:05 p.m., $0.09
    • SanDisk (SNDK) 4:05 p.m., $0.67
    • Riverbed Technology (RVBD) 4:05 p.m., $0.20
    • Tempur-Pedic International (TPX) 4:05 p.m., $0.84
    • Microsoft (MSFT) 4:06 p.m., $0.58
    • Altera (ALTR) 4:15 p.m., $0.36
    • Advanced Micro Devices (AMD) 4:15 p.m., $0.09 


COPPER – no bid this morning – 10yr yields remain below our key TREND line of 2.04% resistance too. Therefore, if you see the pop on the open, and we don’t see a close > 1394 (our immediate-term TRADE line of SP500 resistance), sell. 

  • Record Gold Seen by Top Analysts as Funds Retreat: Commodities
  • Gold May Fall as Slowdown in Europe Curbs Demand From Investors
  • Brent Oil Rises as Europe Recovery Hopes Beat U.S. Supply Growth
  • Copper May Advance on Indications U.S. Economy Is Recovering
  • Lynas Counts Costs as World’s Largest Rare-Earths Plant Held Up
  • Corn Climbs Most in More Than Two Weeks as U.S. May Switch Acres
  • U.K. Joins Spain in Worst Drought for Decades as Crops Emerge
  • Sugar Seen Plunging 22% on Increasing Brazil, India Supplies
  • Israel-Cyprus Deal on Gas as Lebanon Refuses Negotiation: Energy
  • India to Export Sugar for Third Year as Farmers Plant More
  • Anglo Platinum Output Falls on Maintenance; Stoppages Drop
  • Saudis Retake Lead in U.S. Gulf Oil Imports: Chart of the Day
  • Rubber Declines as Spanish Bad Loans Raise Economic Concerns
  • Gold Seen at Record as Hedge Funds Retreat
  • Cocoa Declines on Speculation Producers Will Sell; Sugar Rises
  • Reliance Halt Boosting Diesel as Demand Climbs: Energy Markets
  • Friedland Loses in Rio Mongolian ‘Chess Game’: Corporate Canada 









SPAIN – evidently everyone’s a bearish expert again with Spain down -13% YTD; bear markets bounce obviously after -19% drawdowns (that’s where the IBEX was pre this bond auction, which came in at higher yields vs last – but being spun by whoever as “better” than “expected” – thank goodness broken sources routinely expect the wrong thing at the wrong time).






JAPAN – both Currency and Equities going down now at the same time (this is when it gets more real on the sovereign debt concern front – at least it has in every other major sovereign debt crisis – currency leads). Nikkei down -1.1% last night (down for 10 of last 12 days).










The Hedgeye Macro Team



All ears will be on the commentary of SCC and the performance of MBS.  Fade the sentiment?



We think Q1 upside is expected by the buy side and with the opening of Sands Cotai Central on April 11th, the focus will be on the commentary surrounding the performance of the new property and the related impact on LVS’s existing Macau portfolio.  No doubt the spin will be positive but the reality is that it is way too early to determine the ultimate success of the property and level of cannibalization on existing operations.  In fact, if sentiment moves significantly one way or another following the release and conference call, a prudent strategy may be to fade that sentiment.


Sands is reporting Q1 results next Wednesday night and we are projecting $2.7BN of net revenue and $943MM of EBITDA.  Our estimates are 6% and 5% ahead of the Street on net revenue and EBITDA, respectively.  Half of the upside comes from our higher gaming market forecast for Singapore while the other 50% is concentrated in Macau.  Other 2012 stock drivers will be growth in Singapore – or lack thereof, approval of Lot 3, and new market opportunities (Japan, S Korea, MA, FL) – including the gargantuan Spain project.



Our estimate for Macau property-level EBITDA and net revenues is 7% and 5% above the street at $459MM and $1.433BN, respectively.  More specifically, we’re ahead of the Street on Sands and Four Seasons, and in-line on Venetian’s performance.  Sands played very lucky while FS and Venetian experienced normal hold rate on their baccarat play.  We estimate that EBITDA would have been $17MM lower if Sands held at its historical rate of 2.89%.




Venetian is projected to report net revenue of $763MM and EBITDA of $276MM, +2% and in line with consensus, respectively.

  • Net gaming revenue of $676MM
    • $269MM of net VIP revenue    
      • RC volume of $13.6BN (up 10% YoY) assuming 25% direct play and a hold rate of 2.86% (just slightly below Venetian’s historical hold rate of 2.92%)
      • Rebate rate of 89bps of 31% of hold
    • Mass table revenue of $343MM, up 25% YoY
      • Drop of $1.2BN and 28% hold
    • Slot win of $64MM
  • $87MM of net non-gaming revenue
    • $58MM of room revenue ($243 ADR/92% Occ/$223 RevPAR)
    • $19MMof F&B revenue
    • $40MM of retail, entertainment and other revenue
    • $29MM of promotional expenses
  • Variable expenses of $375MM
    • $311MM of taxes
    • $45MM of junket expenses assuming a commission rate of 1.21% (rebate + promoter expense )
    • $22MM of recorded non-gaming expense
  • $90MM of fixed costs, up 6% YoY but down from an estimated $96MM last quarter



We expect Sands to report net revenue of $358MM and EBITDA of $107MM, 8% and 17% above the Street, respectively.

  • Net gaming revenue of $350MM
    • $152MM of net VIP revenue    
      • RC volume of $6.7BN (down 19% YoY) assuming 14% direct play and a hold rate of 3.59%
      • Rebate rate of 108bps or 30% of hold
      • Assuming historical hold of 2.89%, net revenues and EBITDA would have been $32MM and $17MM , respectively
    • Mass table revenue of $152MM, up 12% YoY
      • Drop of $708MM and 21.5% hold
    • Slot win of $30.5MM
  • $7MM of net non-gaming revenue
  • $196MM of variable expenses
    • $165MM of taxes
    • $21MM of junket expenses assuming a commission rate of 1.39% (rebate + promoter expense ) or 39%
    • $4MM of recorded non-gaming expense
  • $50MM of fixed costs, up 19% YoY and flat QoQ

Four Seasons

We estimate $312MM of net revenue and $76MM of EBITDA, 23% and 6% above the Street, respectively.  On the surface one would assume that there would be more of the revenue growth dropping to the bottom line, however, almost all the growth is from low margin VIP business which has a ‘teens’ margin. 

  • Net gaming revenue of $302MM
    • $248MM of net VIP revenue    
      • RC volume of $12.8BN (up 225% YoY) assuming 16% direct play and a hold rate of 2.89%
      • Rebate rate of 95bps or 33% of hold
      • The historical hold rate at FS has been 2.69%
    • Mass table revenue of $42MM, up 26% YoY
      • $107MM drop and 39% hold
    • Slot win of $12MM
  • $10MM of net non-gaming revenue
    • $9MM of room revenue
    • $7MM of F&B
    • $6MM of retail, entertainment and other
    • Promotional expenses of $12MM
  • $210MM of variable expenses
    • $166MM of taxes
    • $35MM of junket expenses assuming a commission rate of 1.22% (rebate + promoter expense )
    • $6MM of recorded non-gaming expense
  • $20MM of fixed costs, up 3% YoY and flat QoQ



We project $819MM of net revenue and EBITDA of $429MM, 4% and 7% above consensus, respectively.

  • Net gaming revenue of $678MM
    • $240MM of net VIP revenue    
      • RC volume of $14.5BN, up 43% YoY
      • Hold rate of 2.9%
      • Rebate rate of 1.25%
    • Mass table revenue of $289MM
      • Drop of $1.3BN, up 30% YoY and 22.5% hold
    • $150MM of slot & EGT win
  • $140MM of net non-gaming revenue
    • $78MM of room revenue ($340 ADR/99% Occ/$337 RevPAR)
  • $82MM of gaming taxes and $44MM of GST
  • $255MM of fixed costs, compared to an estimated $253MM in 4Q           




We estimate that Venetian and Palazzo’s net revenues will be $351MM with EBITDA of $97MM, which are in-line and 8% ahead of Street estimates, respectively.

  • Net casino revenue of $114.5MM
    • Table revenue of $99MM
      • Drop of $536MM, up 12.5% YoY 
      • 18.5% hold
        • 18% is the average hold for the last 3 years
    • $38MM of slot win
      • $448MM of slot handle, up 10% YoY and 8.5% hold
      • Last year was a very easy comp for LVS with slot handle down 36% YoY as they cut comps too deep
    • Rebates of $23MM or 4.3% of GGR
  • $121MM of room revenue - $190 RevPAR (+7% YoY)
  • $137MM of F&B revenue
  • $21MM of promotional allowances or 15.5% of GGR
  • 10.5% YoY increase in operating expenses to $245MM – up 5% YoY and down $4MM QoQ



We expect Sands Bethlehem to report $118MM of revenue and $26MM of EBITDA, 15% and 12% above consensus estimates, respectively.

  • $107MM of gaming revenues
    • Table revenue of $31MM
    • $76MM of slot win
  • $11MM of net non-gaming revenue
  • $47MM of taxes
  • $46MM of operating expenses (+12% QoQ)


  • D&A: $198MM
  • Rental expense: $15MM
  • Corp and stock comp expense: $50MM
  • Net interest expense: $58MM


Not the highest quality quarter but guidance was better.



MAR remains our favorite hotel company for the long-term.  The stock has had a nice ride and could take a breather, but numbers look like they are going higher.  Absent macro deterioration – MAR more defensive but clearly not immune – the stock should continue to work over the intermediate and long term.


MAR’s Q1 results were slightly below our projections numbers but in-line with the street.  A low tax rate contributed almost $0.02 to the Q.  Here’s where the miss vs. our numbers came from: 

  • Base mgmt and franchise fees were $13MM lower (~5%)
    • Lower managed room growth – only 0.3% YoY vs. our estimate of 1.6% (3.4k less rooms were added to the system than we modeled)
    • Base fees were also negatively impacted by a $3MM reversal of fees from 2 contract revisions
  • Incentive fees were $8MM higher, up 18%
    • 29% of managed hotels paid incentive fees vs. 25% last year
  • Owned leased/other profits were in-line but revenues were lower – so basically it was in-line since top line doesn’t really matter for this line item.  We don’t know what the breakout was yet between fees vs. owned/leased
  • G&A was $3MM lower
  • The tax rate was 3.7% lower than guided rate and contributing almost $0.02 in EPS
  • Net interest expense was $7MM higher than we modeled but equity earnings loss was $4MM lower as well

Other stuff:

  • WW RevPAR was 6.8% - above the 5-6% guidance range
  • MAR bought back $150MM of stock or 4.2MM shares in the Q – we modeled $200MM
  • Provided YoY comparison on Autograph hotels for RevPAR
  • There were a lot more hotel “exits” this quarter than prior quarters – hence, lower net rooms growth 


  • Increased WW RevPAR guidance to 6-8% from 5-7%
  • Increased FY fee guidance by $15MM or 1%
  • Increased owned, leased corporate housing and other, net result by $5-10MM
  • Raised EPS guidance 5-6 cents
  • Upped capex guidance by $50MM
  • Increased EBITDA guidance by $10-25MM

get free cartoon of the day!

Start receiving Hedgeye's Cartoon of the Day, an exclusive and humourous take on the market and the economy, delivered every morning to your inbox

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.