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IDEA ALERT: SHORTING MCD

Takeaway: Short $MCD was added to our Real-Time Positions this morning. The positive $MCD reaction to $YUM's EPS was not warranted.

We don’t think the time is right to buy MCD – yet.  The stock reacted favorably to the YUM 3Q earnings results.  These are two well-run, global companies in the same industry but we think there are some important caveats to bear in mind when comparing their respective outlooks.

 

This morning, we added MCD on the short side to our Real Time Positions as the stock was overbought from an immediate-term TRADE perspective.  Our fundamental outlook matches Hedgeye CEO Keith McCullough’s quantitative setup.  

 

Fundamental Outlook

 

We took a step back from our positive stance on the stock in April and we think it will be at least another couple of months before we become constructive on the name again.  While downside in the stock is likely not substantial, we think that the positive reaction in McDonald’s stock today is overdone for two reasons:

  1. As our note following McDonald’s November sales release, “MCD SALES HUNKERING DOWN FOR WINTER” described, compares ramp up dramatically through February for the company’s US division.  Yum! Brands’ US business is also bumping up against a difficult compare in 4Q but the domestic business, for YUM, is far less important than it is for MCD. 
  2. The YUM results were initially viewed as a positive for MCD and SBUX in that they could imply a diminished risk of disappointing 3Q results in China for those two companies.  While YUM’s China results were strong, it was largely margin-driven.  Comparable sales decelerated sequentially in 3Q and are expected to continue to do so in 4Q.  An additional important caveat is that YUM’s fiscal 3Q ended on 9/8; the full third calendar quarter may not look so positive in China, especially given some of the recent disappointing macroeconomic data for September. 

McDonald’s faces plenty of risks over the next few months as the euro-crisis continues to drag on, and Growth Slowing in the US and Asia drags on consumer spending.  We are waiting for the right time to get behind this stock, especially given the company’s resilient performance in prior periods of poor economic growth, but believe that to do so now would be premature. 

 

IDEA ALERT: SHORTING MCD - mcd us comps

 

Quantitative Outlook

 

Per Keith’s quantitative models, immediate-term TRADE support for MCD is at $90.18.  Long-term TAIL resistance is at $93.35

 

IDEA ALERT: SHORTING MCD - mcd levels

 

Howard Penney

Managing Director

 

Rory Green

Analyst


#EARNINGS SLOWING UPDATE: IS CORPORATE COST-CUTTING COMING BACK WITH A VENGEANCE?

Takeaway: Broader economic growth suffers when corporate executives broadly shift their focus to managing earnings expectations.

SUMMARY BULLETS:

 

  • As we have stressed in recent weeks, the 3Q12 earnings season will likely be the most dour since the Global Financial Crisis and, perhaps more importantly, consensus estimates for NTM EPS growth are simply too rich – particularly in light of aggressive margin assumptions embedded in consensus expectations.
  • As such, the direction and tone of corporate guidance will likely be as important to stock performance as it has ever been in the post-crisis period. In this regard, the next few months will definitely be a stock-picker’s environment for those seeking to meet year-end performance targets.
  • As we highlighted in recent notes, a key risk that could equate to an incremental drag on global growth over the intermediate term is an acceleration of corporate cost-cutting initiatives across both domestic and international corporations. Moreover, recent company commentary suggests this trend is already underway.

 

#EARNINGS SLOWING UPDATE

On our 4Q12 Macro Themes Call Monday afternoon (email us for the replay materials if you missed it live), we detailed our thesis which suggests: A) the 3Q12 earnings season will be the most dour since the Global Financial Crisis and, perhaps more importantly, B) consensus estimates for NTM EPS growth are simply too rich – particularly in light of aggressive margin assumptions amid a backdrop of global economic data that has been tepid at best/nasty at worst in recent months.

 

Bombed-out 3Q12 expectations provide room for short-squeezes across a number of names when they report the quarter, but we believe the broader takeaway here is just that: “where do we go from here?”. As such, the direction and tone of corporate guidance will likely be as important to stock performance as it has ever been in the post-crisis period.

 

#EARNINGS SLOWING UPDATE: IS CORPORATE COST-CUTTING COMING BACK WITH A VENGEANCE? - 1

 

We discuss the implications of “B” later in this note; for now, here’s an update on very recent developments with respect to “A”:

 

  • The Rio Tinto CEO says the company will defer large capital programs, as it has become more cautious about its outlook for the next few quarters, partly because of anticipated delays in Chinese stimulus efforts. The company now sees its $14B CapEx forecast for next year as a ceiling that could be reduced; moreover, it is expecting to materially reduce spending over the next few years.
  • Alcoa revised down its global aluminum growth forecast to +6%, down from +7% prior, citing a slowdown in China as a negative drag on the 2H outlook. They also updated end-market growth forecasts – most notably the Heavy Truck and Trailer segment, which is now seen coming in at -7% to -9%, which is down from a prior forecast of -3% to +1%. The company anticipates a slowdown across all major regions, particularly Europe and China.
  • FedEx announced programs aimed to increase profits by $1.7B annually by end of FY16; a significant portion of the profitability improvement will come from cost reductions at FedEx Express and FedEx Services.
  • Cummins guides FY12 revenue to come in around $17B vs. a prior forecast of $18B. They cited demand in China that has weakened in most end markets and they have also lowered their forecast for global mining-related revenues. Additionally, they guided EBIT margins to come in below previous guidance primarily due to the sharp reduction in revenues. The company is taking actions including a number of measures to reduce costs, including planned work week reductions, shutdowns at some manufacturing facilities, and some targeted workforce reductions.

 

While it may seem like we’re cherry-picking negative commentary (there’s always some degree of negative commentary to be found every earnings season), one would be remiss to ignore that these four companies represent a combined $147 billion in market cap. Moreover, when analyzed with respect to prior warnings given by companies like CAT, HPQ, NSC, IHS and SPLS, it’s easy to spot a trend developing here. This is a classic case of “ignore the data at your own risk”.

 

GLOBAL GROWTH UPDATE

Each month as a small part of our rigorous Global Macro research process, we amalgamate a broad sample of global PMI readings to get a data-driven sense of how global growth is trending on a sequential basis. The analysis includes 23 readings from 14 countries and/or economic blocs and we measure the absolute level of the indices and the sequential deltas on a median basis to produce a top-down look upon trends across the global economy.

 

In this light, it would appear that global economic growth slowed at a slightly slower rate in SEP vs. AUG (49.7 from 49.2); the metric does, however, remain below the 50 line, which economists use to delineate expansion vs. contraction readings. To the extent global growth continues to hang out in contraction territory on a sequential (i.e. MoM; QoQ) basis, we expect YoY growth readings to come under incremental pressure to the downside. On the flip side, the +50bps sequential  uptick reminds bears that the global economy is unlikely to slow in a perpetual straight line. There is obviously room for improvement from bombed-out levels of global economic data, but the broader callout is that any gains will be limited and the trend is likely to continue south.

 

#EARNINGS SLOWING UPDATE: IS CORPORATE COST-CUTTING COMING BACK WITH A VENGEANCE? - 2

 

WHEN MACRO MEETS MICRO

As we highlighted earlier, the key risk that could reaccelerate the rate(s) of sequential contraction across various metrics of global growth readings is an acceleration of corporate cost cutting – both domestically and globally. As was vividly demonstrated across the last corporate earnings slowdown cycle (2007-09), broader economic growth suffers when corporate executives shift their focus to managing earnings expectations (as opposed to their businesses) en masse.

 

S&P 500 NTM EPS growth expectations are fairly robust – as are forecasts for operating margin growth. As we highlighted on our aforementioned conference call, corporate margins are asymmetrically stretched relative to prior cycles and as a share of the economy – suggesting limited room for upside to corporate operating efficiency. In that light, where will the revenue growth needed to meet such aggressive out-year margin expansion expectations come from if a large contingent of international corporations engage in reducing SG&A and CapEx at roughly the same time?

 

#EARNINGS SLOWING UPDATE: IS CORPORATE COST-CUTTING COMING BACK WITH A VENGEANCE? - 3

 

That’s a question we aren’t sure anyone has an answer to at the current juncture. What we do know is that corporate executives know full well what is being asked of them with respect to NTM forecasts. That will put a tremendous amount of pressure on companies to A) cut guidance (CMI); B) cut costs (FDX); C) do both (RIO); or D) pretend everything is generally fine and hope for a resurgence in demand (AA).

 

At any rate, the next few months will definitely be a stock-picker’s environment for those seeking to meet year-end performance targets.

 

Darius Dale

Senior Analyst


YUM: CHINA IS WHAT MATTERS

Takeaway: We like $YUM for a longer-term TAIL investment but are concerned by China macro picture and difficult 4Q compares in the immediate term

Yum! Brands reported $0.99 in EPS versus consensus expectations of $0.97.  The China division drove almost three-quarters of the EBIT growth as lower COGS helped profitability in YUM’s most important market. 

 

3Q Report Card

 

YUM: CHINA IS WHAT MATTERS - yum earnings recap

 

YUM is trading up 8.5% as, during the earnings call, management provided bullish commentary on China and the growth opportunity that market presents for the company’s brands.  With that said, we view China’s volatile economy as the greatest risk in the stock.  Management acknowledged this reality but came across as confident that China would continue to perform profitably.  Historically, buying this stock on “China scares” has proved profitable, particularly over longer durations.  

 

However, given difficult 4Q compares for YUM’s business in China and the persistence of concerning economic data from the region, we remain on the sidelines for the immediate-term TRADE.  It is worth bearing in mind that YUM’s 3Q ended September 8th; the macro data for September, so far, pertaining to China were, generally, sub-consensus.  Longer-term, this remains one of the best growth companies in the industry.  From a fundamental perspective, depending on the macro backdrop, we would likely become more positive on the stock on an immediate-term basis at $65 per share.

 

Press Release & Earnings Call Details


The China Division drove almost 75% of the consolidated EBIT growth of the company as unit count grew 18%, same-restaurant sales grew 6%, and restaurant level margins improved year-over-year on lower than expected food costs.  Management expects China comps to be in the flat-to-low-single-digit range in the fourth quarter.

  • Transactions declined 1% versus 27% growth in 3Q11
  • Opening 750 restaurants in China this year (18% growth) versus initial expectation of 600
  • Difficult to know how much of sequential slowdown in comps is due to economy
  • Pizza Hut comps gained 8% in 3Q
  • KFC comps gained 6% in 3Q
  • 3Q labor inflation was 8%, commodity inflation was 2%

China Outlook

  • 4Q is toughest SSS compare…expecting flat-to-LSD comps with 5% price (negative LSD transactions)
  • Expecting slight y/y improvement in 4Q restaurant operating margins in China due to deflation in commodity prices
  • Development focus is shifting from Tier 1 cities to lower tier (better returns, margins)
  • Continuing 20% margins “over the long run”
  • Current development rate is 18% which lowers SRS required in FY13 to hit earnings growth target

Potential Issues for the China Division


NEAR-TERM: Price cycling off the menu and sequential economic deterioration

INTERMEDIATE-TERM: Economic deterioration in excess of what management is anticipating

INTERMEDIATE-TERM: Management growing too fast.  Currently, returns imply that “over-growth” is not yet a problem

 

YUM: CHINA IS WHAT MATTERS - china quadrant 1

 

 

The United States Division has gone from abysmal to impressive in little over a year.  Whether or not this performance can be sustained remains to be seen.  The US generated 6% in same-restaurant sales growth and management highlighted the completion of the KFC and Pizza hut refranchising as a positive. 

  • Doritos Locos Tacos and Cantina Bell have been key product introductions – should drive sales in FY13
  • KFC sales and profits benefitting from new items and advertising
  • Pizza Hut business in the US is stabilizing – added stores in 2011 after 10 years of unit decline
  • Commodity costs were flat (below industry) in the U.S. due to supply chain initiatives

US Outlook

  • 4Q will be weaker than YTD for US
    • Overlap of 53rd week
    • Lapping toughest comps of last year
    • YTD refranchising of 340 restaurants in US will be profit dilutive  in 4Q
  • Ongoing growth model for the US calls for same-restaurant sale growth of 2-3%

YUM: CHINA IS WHAT MATTERS - yum us quadrant1

 

The YRI Division delivered same-restaurant sales growth of 2%, including 5% in emerging markets.  Ramadan negatively impacted comps by 1%.  The division drives roughly 8-9% of the company’s overall EBIT growth. 

  • Building 900 new units this year
  • Opportunities in developed countries like France, Germany, Russia where YUM underpenetrated
  • KFC Russia business improving dramatically, AUV’s at $1.8m from $1.2m two years ago

YRI Outlook

  • 4Q comps should benefit by 1% due to Ramadan timing
  • Positive earnings growth for YRI in 4Q offset by impact of lapping 53rd week in 2011
  • Ongoing growth model for YRI calls for  unit growth of 3-4% and SRS of 2-3%
  • 45% of YRI units are in emerging markets

YUM: CHINA IS WHAT MATTERS - yum yri quad1

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst

 

 

 

 


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CHART DU JOUR: MACAU OCT TABLE REVENUE PROJECTION

Despite record comparison, October 2012 should post solid YoY growth

 

  • Assuming post-Golden Week trends in 2011 are carried forward in 2012, we believe Macau table revenues growth for October may come in at the high end of our 4-9% projection range.  Even when adjusted for high hold in October, the calculation yields growth in the middle of our range.
  • Last October, average daily table revenues (ADTR) post Golden Week slipped 2% relative to that for Sept 2011
  • October gaming revenues could hit a new record month.  Easier comps should contribute to accelerating growth in November and December.

 

CHART DU JOUR: MACAU OCT TABLE REVENUE PROJECTION - macau234


HST 3Q CONF CALL NOTES

Strong quarter and guidance

 

 

CONF CALL NOTES

  • Exceptionally strong group demand fostered solid rate growth across all segments of their business
  • 3Q marked the second straight Q where they exceeded peak 2007 occupancy levels
  • Comparable F&B revenue growth benefited from outlet sales at several of recently renovated restaurants which saw significant increases in activity

  • Strong rate performance and tight cost controls, coupled with lower utility costs, led to strong expansion in operating margins
  • Key driver of 3Q results was the 20% increase in corporate group demand, which led to a more than 6% increase in group room nights.  Larger group hotels, especially those in Boston and several resort markets, outperformed the overall portfolio.
  • Luxury hotels also experienced strong group activity, especially on the rate which were up >6% in the Q
  • Benefiting from both mixed shift and higher absolute rates in both the corporate and discount segments, average group rates were up almost 3.5% and group revenues were up nearly 10%.
  • Given the increase in group, their managers were able to focus on driving rate growth in transient. Overall growth exceeded 5% - spread across all segments of transient.  1.5% increase in retail room nights, which further increased transient rates.  Luxury transient demand also increased by more than 3%.  Transient revenues increased 6% in 3Q.
  • Current Q booking activity for groups are likely to slow given reduced capacity of vacant rooms
  • Overall bookings in the third quarter were up nearly 9%.  Group revenues on the books are up 7.5% for 4Q. 
  • Likely that the closing of some of the $300-400MM of sales they are planning for 4Q could slip into 2013
  • HST's rent has already increased by more than $6MM annually as a result of the Vornado deal and would expect significant additional rent increases as the project is completed and leased

  • HST is at an advanced stage for negotiating (with Hyatt) on a 131 unit timeshare development on their excess land at Hyatt Regency Maui.  Timeshare units will have access to the amenities at the existing hotel.  In addition to making money on the timeshare unit sales, they will also be making incremental revenues on their existing amenities and have the ability to spread costs across more rooms.  HST will contribute land and some cash.  They expect to create value of $400-500MM from this project.
  • Recent REVPAR results in September have been weaker than recent trends.  This was anticipated though given the timing of the Jewish holidays.  Halloween occurring mid-week and the Presidential elections will also impact the 4Q. However, all of this was expected and is not an indication of any fundamental slowdown. 
  • Too early for guidance for 2013, but they are bullish as occupancies will be in record levels. 
  • Managers should be able to get good increases on special corporate rates, supply remains low, and international travel continues to grow at a high single-digit pace
  • PA REVPAR:  +20.8%.  Both the Downtown Marriott and the Four Seasons had excellent growth in rooms and F&B revenues. Easy comp since there was renovation in 2011.  Expect Philadelphia hotels to underperform our portfolio in 4Q due to a decline in group and transient demand as well as a renovation at the Philadelphia Airport Marriott.
  • Tampa REVPAR:  +18.8%: Tampa Waterside Marriott hosted the Republican National Convention and the REVPAR growth was driven by improvements in ADR for both group and transient business for the quarter
  • Boston REVPAR:  +15.4%: Outperformance was driven by strong group demand, which allowed rate compression for both group and transient business.  Expect Boston hotels to have a good 4Q due to strength in group revenues and an expectation of continuing strong transient rates. 
  • San Fran REVPAR:  +12.7% due an ADR improvement of over 9%. Strong occupancy allowed operators to shift the mix of business to higher-rated transient segments. Expect San Francisco to continue to perform very well in 4Q.
  • Miami/Ft Lauderdale REVPAR:  +11.4%.  Expect Miami/ Fort Lauderdale hotels to have a good 4Q due to solid group bookings. 
  • LA REVPAR:  +9.1%:  Strong group demand created compression to drive both group and transient rate.  Expect Los Angeles to have a great 4Q due to robust group and transient demand.
  • Hawaii REVPAR:  +7.7%: all due to increased rate from mix shift.  Strong group and transient demand allowed shift in the mix of business to higher-rated categories.  Expect our Hawaiian hotels to have a good 4Q.
  • NY REVPAR:  +4.6% due to occupancy and rate growth. They were impacted by renovations at most of their hotels.  Expect a challenging 4Q.
  • Chicago REVPAR:  +3.5% due mostly to rate growth.  Underperformed our portfolio due to lower levels of city wide and group demand compared to the third quarter 2011.  Expect much better performance in 4Q due to better group and transient demand.
  • DC REVPAR: -0.80% (due to occupancy declines).  Group and transient were weak.  Series of room renovations for 4Q so it should continue to underperform.  Expect 2013 to be better.
  • European REVPAR:  +4.1% (ex Sheraton Roma), EBITDA up over 9%.  Inbound international travel into Europe continues to be strong.
  • Wages and benefit only increased 1.4% on a per occupied basis.  Despite a big increase in revenue, costs that are variable with revenues such as sales and marketing and cluster and shared service allocations were well controlled. 
  • SG&A and marketing, and repairs and maintenance increased only 3.2%
  • Utility costs were down 9.6%
  • Expect that comparable RevPAR growth will be increasingly driven by rate in 4Q and good flowthrough as a result
  • Expect lower F&B growth in the 4Q
  • Expect unallocated costs to increase in-line with inflation
  • Expect utility costs to decline in the 4Q

 

Q&A

  • Expect that calender 3Q would have been closer to 6% 
  • Group bookings have been very strong.  Transient bookings have been very strong.  Gives them confidence in the continued strength of the business.
  • Expect that corporate activity will be more condensed.  Still expect group to be up meaningly but not as good as 4Q since they have less availability, but ADR should be very good.
  • The Grand Hyatt acquisition cost was a little lower than they projected
  • Feel like this will be an extended recovery cycle.  In 2013, whether they are a net seller or buyer will depend on what the acquisition pipeline looks like.  Think that they will be neutral.
  • NY- think that supply addition pressure will abate.  Their numbers are impacted by renovation disruptions.  Almost all their NY hotels will have no construction disruption next year so they should do well in that market.
  • Renovation impact in 2012?  They know that there has been a material impact but it's tough to quantify it.  Fairly confident that their capital spending should significantly decline in 2013 and therefore there should be much less disruption.
  • Will not disclose the timeshare capital commitment until all the documents are executed in a few weeks
  • Canada: A lot of the increase in the quarter was currency driven.  There was a small increase in local currency too.
  • The booking cycle has lengthened a little bit. Rooms that they booked in 3Q held up well.  Didn't expect that the final group revenue growth would be as good as 10% in the Q.  Given stronger close in booking and better retail bookings, they were able to push rate.
  • $25MM increase in capex budge?  Some was an acceleration of spend from 2013 to 2012.
  • Why does their guidance imply a margin slowdown in 4Q?  Some of that was due to the real estate tax bill.  YTD they have been growing at less then inflation, but for the year they still expect a 6% increase - so it's heavily back-end loaded.  Same thing with insurance.  F&B and other: they aren't as optimistic on that category as they were earlier this year.
  • How much of the guidance increase/better performance was due to sandbagging vs. just improving fundamentals? REVPAR has trended better, saved money in real estate taxes which they didn't expect, lower unallocated costs than expected, and reduction in utility costs.
  • CMBS market does seem to be strengthening.  That is a key source of financing in M&A.  They continue to want to be an active seller over the next 2 years in order to improve the quality of their portfolio.  Expect that their sales targets for 2013 will be even more aggressive than 2012.
  • Continue be interested in investing in Europe, Brazil and Asia.  However, they expect that the bulk of their activity will be in the US.
  • Groups continue not to commit to a lot of F&B in advance unless they are forced to but end up spending a decent amount anyway
  • Without putting a specific number on it, they fell very optimistic about 2013. Occupancy being so high, combined with the level of group activity, they expect a lot of rate growth next year.
  • Do not expect a material level of disruption from Vornado's redevelopment activity. 
  • Still have more transient and less group today than they had in 2007.  More group is going to benefit them - it's not just rate but it's also higher F&B spend.  As they get less availability for transient, the low end discount transient business is what gets displaced, not the high end.
  • Hotel acquisition in Nuremberg:  Bought it all cash and they intend to finance.  It's small so there is a fairly liquid market in Germany that will provide attractive (south of 4%) financing at the 50% ATV.  Multiple was also attractive - significantly below replacement cost.  The market in Europe is not extremely active.  Most of the sellers are "motivated."
  • As they start off a year, expect that about 70% of their Group rooms would be on the books.  Group represents 37-38% of total rooms.  They are likely going to be closer to 38-39% of total this year.
  • Saw a significant increase in their corporate group bookings.  That continues to be the area where they see the biggest improvement.  Association is a bit less consistent. 
  • As they look at 2013, there is more business on the books each quarter YoY
  • Benefit from RNC at their Tampa hotel - not that material
  • European debt portfolio:  would be happy to own it

 

HIGHLIGHTS

  • YTD 2012 revenues benefited by $61MM from the acquisition of 10 hotels (~4,000 rooms) in 2011 and the acquisition of the Grand Hyatt DC on July 16, 2012 
  • Investment & Capex summary in 3Q:
    • ROI investment capex: $24MM
      • "Three properties where we recently completed extensive redevelopment work, the Atlanta Marriott Perimeter Center, the Chicago Marriott O'Hare and the Sheraton Indianapolis, have performed exceptionally well. On average, RevPAR increased 38% for both the quarter and year-to-date 2012 when compared to the pre-construction period in 2010. Due to the significant capital expenditures affecting nearly every aspect of these properties including, in the case of the Sheraton Indianapolis, the conversion of one hotel tower into apartments, these properties are excluded from our comparable results."
    • Acquistion capex: $25MM 
      • Finished the repositioning of the NY Helmsely Hotel to Westin NY Grand Central on October 1, 2012 which will have its grand opening later this month
    • Renewal and replacement capex: $66MM
      • Completed renovation of the 834 rooms at the Hyatt Regency Washington and 45,000 of meeting space at the NY Marriott Marquis
  • On July 30, 2012, HST "leased the retail and signage components of the New York Marriott Marquis Times Square to Vornado Realty Trust. Vornado will redevelop and expand the existing retail space, including converting the below-grade parking garage into high-end retail space and creating six-story, block front, LED signage spanning over 300 linear feet at an estimated cost of $140 million. As a result of the agreement, the annual base rental income is now well in excess of the previous rental income for the leased space.  Furthermore, once Vornado completes the planned redevelopment, the Company has the potential to realize significant additional incentive rental income. The lease has a 20-year term with options that, upon exercise, would require title to the retail space to be conveyed to Vornado for a sales price based on future cash flows in the year of sale."
  • YTD HST "has issued $1.5 billion of debt, with a weighted average interest rate of 3.7%, and used the proceeds, along with available cash, to repay $1.8 billion of debt with a weighted average interest rate of 6.6%. As a result of these transactions, the Company has decreased its weighted average interest rate by approximately 80 basis points, to 5.5%, and lengthened its weighted average debt maturity to 5.4 years."
  • In 3Q, HST "entered into a $500 million term loan through an amendment to its credit facility. The term loan has a five-year maturity and a floating interest rate of LIBOR plus 180 basis points, approximately 2.0%, based on the Company's leverage level at September 7, 2012. Additionally, the Company issued $450 million of 4¾% Series C senior notes due 2023 at the lowest interest rate for senior notes in the Company's history.  The proceeds from these issuances were used to redeem the remaining $650 million of 6⅜% Series O senior notes due 2015 and$150 million of 6¾% Series Q senior notes due 2016 and for general corporate purposes."
  • "On July 26, 2012, the second fund of the Company's joint venture in Europe ("Euro JV Fund II"), in which the Company holds a 33.4% interest, acquired the 192-room Le Meridien Grand Hotel in Nuremberg, Germany, for approximately €30 million ($37 million). The Company contributed approximately €10 million ($13 million) to the Euro JV Fund II in connection with this acquisition."
  • "On September 17, 2012, the Company's board of directors authorized a regular quarterly cash dividend of $.08 per share on its common stock."

Global Slowdown Continues

As we head further into earnings season, it is becoming more and more apparent that our thesis on Growth Slowing and Earnings Slowing is correct. With companies like FedEx (FDX), Caterpillar (CAT) and Chevron (CVX) offering cautious or lower guidance, the market is looking more negative day after day. 

 

While we consider JP Morgan’s (JPM) Q3 earnings report on Friday to be the “true” kickoff of earnings season, yet another big company is offering guidance with caution. Rio Tinto (RIO) said the company would defer large capital programs due to cautious outlook on the next few quarters and a delay in Chinese stimulus spending - keep in mind China isn’t keen on seeing higher fuel and food prices anytime soon.The company is also expecting to materially reduce spending over the next few years.

 

 

Global Slowdown Continues  - Chart of the Day


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