Takeaway: We like the IGT, WMS, and BYI coming out of G2E. Fundamentals for the US operators look softer.

Suppliers look good, operators, uh, not so much 



Key Supplier Takeaways from G2E 

  • Overall, we thought G2E was a very good show for the suppliers.
  • WMS surprised on the upside in terms of content this year.  WMS will appeal to investors looking for a turnaround on a beaten down stock and there was certainly a buzz in the investment community out at the show.  The excitement probably means WMS works for a long trade.  However, we would caution that the appearance of good content doesn’t always translate into high revenue generating games.  Even if the content performs, it will be at least a couple of quarters before the revenue impact is meaningful.  WMS’s near-term earnings visibility is cloudy.  Nevertheless, the stock will likely run over the next week or two.
  • BYI displayed very good content and they are outperforming with their existing content.  While Grease has peaked, Michael Jackson is doing extremely well and NASCAR was well received by slot managers at the G2E.  Market share will likely continue to rise and BYI is certainly a better earnings story than WMS.  On the margin, BYI right now is the supplier to beat.
  • IGT had some good content and the earnings outlook is strong.  We still expect 20%+ EPS growth for next year.  Our biggest concern remains “brain drain” and we heard more of that from our private industry contacts.  Having said that, it will take a year before that impacts content, in our opinion, and in the meantime, investors should feel good about earnings visibility.  Management certainly seems bullish.

MGM and Las Vegas

  • As we mentioned last week, MGM management seemed less optimistic that the Q3 RevPAR decline was a one shot deal.  Overall softness has carried over from the Summer into the Fall.  We spoke to folks at other properties and other market participants and we believe the Strip numbers were not good for either August and September.  We already published a negative YoY projection for August Strip revenues and that seemed confirmed with our contacts out in Las Vegas.  Furthermore, October numbers may look ugly with one less Saturday and Sunday compared with October 2011.
  • MGM focused on the positive in their presentation which was convention bookings for 2013.  While certainly a positive, convention rooms generate only 13% of total room nights and those folks don’t gamble as much.  We think slot volume growth is the most important metric and it has turned consistently negative YoY.

Regional Gaming

  • PNK seemed bullish but aside from that Louisiana focused operator, we heard little positive commentary from the regional operators.
  • Despite a favorable calendar, September may look weak.  Indeed, Missouri same-store gaming revenues were likely down 5% (we get these numbers early).  Operators probably needed a decent September to make Street revenue projections.  That likely won’t happen and estimates may be going down ahead of earnings.

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more

Premium insight

[UNLOCKED] Today's Daily Trading Ranges

“If I could only have one thing of the many things we have it would be my daily ranges." Hedgeye CEO Keith McCullough said recently.

read more

We'll Say It Again: Leave Your Politics Out of Your Portfolio

If your politics dictates your portfolio positioning, the Democrats and #NeverTrump crowd out there have had a hell of a week.

read more

Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more