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In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance






  • LITTLE WORSE:  Numbers were in line, but there was some weakness in the lodging and vacation exchange and rental drivers.  2013 guidance looks solid


  • WORSE:  RevPAR growth was up 2% or 3% on a constant currency basis.  WYN said that RevPAR growth appears to be slowing partly due more construction and that things have already recovered.  The company expects to be at the lower end of their guidance range for RevPAR.
  • PREVIOUSLY:  Systemwide growth of 5-8%


  • LITTLE WORSE:  Even with the addition of the 3,000 HPT rooms, room growth was only up 1% YoY.  It looks like WYN is going to end the year at the low end of their guidance range.
  • PREVIOUSLY:  Growth of 1-3%


  • LITTLE WORSE:  # of exchange members is tracking just below the low end of guidance.  In the release, # of rentals was +3% (our math says +5%) so they either missed the guidance range or came in at the low end.  Pricing on rentals was down 9% YoY or -2% on a constant currency basis, the lower end of company guidance. 
  • PREVIOUSLY:  # exchange members: -2% to flat; # of rentals: +4-7%; rental price per transaction: -3% to flat


  • BETTER:  Tours came in at +5% above the guidance range as did VPG which also came in at +5% - at the very high end of guidance
  • PREVIOUSLY:  Tours: +1-4%; VPG:+2-5%


  • SAME:  Room nights resulting from Brand.com initiative are up 17% YoY (both YTD and quarterly basis).  WYN has completely revamped 13 brand websites, significantly enhancing features, functionality, and content for over 7,000 properties. 
  • PREVIOUSLY:  “We've made significant progress over the past two years with one of our key Apollo initiatives, brand.com. Revenue in room nights across the brand portfolio are up approximately 20% from this channel year-to date in part due to improved content and Web functionality.”


  • SAME:  Because of improvements to RCI.com, WYN is on track to reduce call volume by over 30% from the inception of the project through year-end 2012, and expect a total reduction of almost 40% by 2015.  Their online web share increased from 13% to currently over 40% and it's still rising.  
  • PREVIOUSLY:  “We completed another successful release of rci.com, which included an upgrade to an innovative click-to-chat functionality with multiple language support. From when we started the project in the first quarter of 2008, through the end of 2012, we expect our migration to online transactions to improve our exchange in rentals margin by over 225 basis points.”


  • SAME:  Continue to target annual EBITDA growth of 6% to 8%, high single to low double-digit growth in their Hotel Group and mid single-digit growth in the Exchange and Rentals Group and Wyndham Vacation Ownership. 
  • PREVIOUSLY:  “We are committed to EBITDA growth of 6% to 8% with high single to low double-digit growth in the Hotel Group and mid single-digit growth in the Exchange & Rentals Group and Wyndham Vacation Ownership."


  • BETTER:  Lodging EBITDA growth exceeded expectations by 28% and 20%, excluding inter-segment fees 
  • WORSE:  Vacation rental and exchange EBITDA fell 9% and was flat ex FX impact
  • PREVIOUSLY:  “We expect Vacation Ownership and Lodging revenues and adjusted EBITDA to be at the high end of their respective ranges. We expect exchange in rentals revenues to be at the low end of its range and adjusted EBITDA to be at the midpoint of its range.


  • BETTER:  Adjusted 3Q EPS came in at $1.13. Using the 2Q period share count EPS would have come in at the high end of company guidance of $1.10
  • PREVIOUSLY:  “For the third quarter, we expect earnings per share to be $1.07 to $1.10. This is below the consensus, reflecting differences in both share repurchase assumptions and seasonality between the third and fourth quarters, however our guidance for the second half of the year is consistent with street expectations”


  • SAME:  same commentary as previous guidance
  • PREVIOUSLY:  “We expect sustainable annual free cash flow of $600 million to $700 million. We remain committed to an investment grade profile, which will enable us to increase debt by $300 million for every $100 million that we add in EBITDA. The result is $1 billion of available cash to deploy each year to increase shareholder value.”


  • SAME:  may do a couple of deals in the future
  • PREVIOUSLY:  “We've probably seen a little more activity recently, more deals seem to be coming to market, but it's not a dramatic change in the volume of our activity, and really kind of what has to change is the expectation of the other side because we're very disciplined. We're not going chase anything, so if deals don't make sense, they're not going to fit into our plan… I would probably characterize it as the pipeline is a little bit stronger than it was last year at this time.”


Takeaway: Across the board beat

In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance.




  •  BETTER:  PNK provides very little forward commentary so we're not able to determine whether the company exceeded management's expections.  However, margins were so strong and the EBITDA beat was sizeable so we will chalk this one up to a Better.   


  • SAME:  The gaming decree is currently undergoing a review process with different ministries in Vietnam. PNK continues to expect phase 1 to open by 1Q 2013.
  • PREVIOUSLY: “"Vietnam is expected to follow a gaming tax model that is similar to that of Singapore. The gaming tax rate is 30% in Vietnam on a mass market play; however, it is our expectation that junket commissions will be deductible for gaming tax purposes. Therefore, the VIP effective tax rate will be materially lower."


  • SAME:  The 1,600 space parking structure is expected to open by the Thanksgiving holiday weekend.  Construction of the second phase of this expansion, a 200-room hotel and multi-purpose event center, has commenced with an expected completion date in the second half of 2013. 
  • PREVIOUSLY: “[River City] "We expect to have the first phase of development open and to the public in 2013. We're looking forward to having access to the garage later on this year, the multipurpose room will come online next before the end of next summer, and the hotel will be opened in the second half of 2013.


  • WORSE:  We expect the transaction to close in the first quarter of 2013. 
  • PREVIOUSLY: "We expect that transaction to close by the end of this year." 


  • SAME:  Excluding severance costs, corporate expenses came in at $4.9MM, in-line with guidance
  • PREVIOUSLY:  [Corp expense of ~$5MM sustainable?] "Yes, we can maintain that level."

HMA: Admissions Growth

Health Management Associates (HMA) recently reported third quarter earnings that were in-line with consensus estimates. Same Store Admissions and Adjusted Admissions both deteriorated sequentially on a one-year basis but improved on a two-year basis. Everything from weather to a decline in uninsured admissions played a role in lagging volume growth.


The company lowered its guidance for SS admissions to between -3.0% & -5.0% but affirmed its expectation for FY2012 SS adjusted admission growth between -1.0% & +1.0%


HMA: Admissions Growth    - HMAstock

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.46%
  • SHORT SIGNALS 78.35%

JCP: Is This How America Dresses?

Takeaway: The new Izod shop opens a discussion for JCP’s customer acquisition cost rising faster than revenue and competitive pricing pressure.


We like much or what JCP is doing to its merchandise right now.Note, that is by no means a change in tone for us. Our call has never been about product. It has been about the cost associated with changing around a retailing strategy by such a startling degree, and the extent to which JCP will wake several sleeping giants (KSS, Macys, Gap) with its aggressive pricing strategy which will ultimately come back and haunt them.


With that mouthful said, check out  the images below from JCP’s latest Izod store. Authors’ note: I’d wear some of that stuff. But that’s not the question to ask. Johnson’s goal is to transform JCP into ‘America’s Store’. Ask yourself if an autoworker in Detroit will wear this? How about a police officer in Columbus? No and No. We realize that we’re being very narrow in our definition of customers, but the reality is that the cost of customer acquisition is going up very dramatically. It’s hard for this product to have such broad appeal to the people that they already count as customers.


So the punchline for JCP is that the revenue delta will improve - but it won’t outstrip the painfully eroding cost delta. That’s bad for JCP. For others like Macy’s, Kohl’s, and Gap, it means that JC Penney is – come hell or high water – bringing more product into the US to sell at what it thinks will be very sharp everyday low prices. The thing that people miss is that 100% of this product WILL SELL. It’s just a question as to what price it sells. 

If there’s significant discounting needed, then it is bad news for these other retailers that need to compete with JCP by offering similar product at what is today elevated prices. When that course corrects, it will be painful competitively for each of these retailers, but will also create a vicious cycle that will come back to haunt JCP as well.

In order of shorts, we like M, GPS, KSS, CRI, JCP, SPLS, and UA.


JCP: Is This How America Dresses? - JCP IZod



Bearish TREND: SP500 Levels, Refreshed

Takeaway: In other words, the market is now bearish TREND.

The stock market is not the economy. Growth and #EarningsSlowing has not changed; the markets re-rating of those economic risks have.


Across our core risk management durations, here are the lines that matter to me most:


  1. Immediate-term TRADE resistance = 1426
  2. Intermediate-term TREND resistance = 1419
  3. Immediate-term TRADE support = 1404


In other words, the market is now bearish TREND. What was support is now resistance. If TREND resistance remains, long-term TAIL support of 1354 is in play.


Risk moves fast,



Keith R. McCullough
Chief Executive Officer


Bearish TREND: SP500 Levels, Refreshed - SPX




Takeaway: Great margins and strong VIP business drove an almost across the board beat

"Our third quarter is highlighted by the opening of L'Auberge Baton Rouge, a terrific addition to the Pinnacle Entertainment portfolio of properties. Our Company delivered very strong financial performance in the third quarter and achieved several operational milestones. L'Auberge Lake Charles produced all-time records...St. Louis produced the strongest year over year improvement in Adjusted EBITDA ..and achieved record Adjusted EBITDA margins in the third quarter."  


- Anthony Sanfilippo, President and Chief Executive Officer of Pinnacle Entertainment




  • L'Auberge Baton Rouge: VIP business has opened up ahead of pace. Attracting guests from local and regional markets. Saw strong visitation from their other properties in the areas which did not hurt the other properties. 
  • July was soft but business was better in August and September.  Trips were down modestly but spend per trip was up modestly driven by Belterra, Lumiere and River City properties.  On pace to grow their top 3 tiers of mychoice by double digits this year
  • Lake Charles: high profile events continued to drive strong VIP visitation
  • St Louis: 33.6% market share. Saw strong increases in VIP . Table revenues grew by 21%. Marketing expenses as a % of gaming revenues down 180bps. River City doing well at controlling construction disruption
  • Belterra: highest market share in 8 quarters. Continue to grow admissions in a declining market
  • Bossier: grew market share by 40bps
  • New Orleans: focused on removing non-value added expenses from the business 
  • Heartland Poker Tour: Belterra will host the champions event
  • Expect Retama park acquisition to close in 1Q13



  • St. Louis: No reason to why they can't continue to expand margins at their properties. Marketing is still one of their largest expenses so they continue to refine those.  With CZR's property leaving the market they believe that some of their loyal patrons will be up for grabs.  Penn will take time to build their reputation in St Louis where they are not known. 
  • Bulk of their visitation in Baton Rouge did come from local markets but they did get some visitation from the Gulf Coast and New Orleans (especially from their Boomtown customers).  They are ramping up advertising there. 
  • Vietnam remaining regulatory hurdles: gaming industry is going through a review now with the government. 
  • Believe that they have an opportunity to build the high end of table game play
  • Diluted share count at quarter end was just over 59MM
  • All of LA should be complete on one card system by the end of the year.  
  • Will rationalize their cost base in Baton Rouge over time.  Will take 2-3 years to get to steady state margins although each quarter should see improvement.
  • In Lake Charles: they continue to believe that the Texas market is underpenetrated.  They have improved their results by continuing to get better yielding customers.
  • River City has been open for a few years now and they continue to see improvements in operating margins
  • Belterra:  continue to think that they have the best property in the area but it's a destination.  They are yielding the quality of the guest coming into their hotel.
  • Thinks that their margins this quarter is sustainable and have room for improvement. 
  • Having a great time in the facility is the most important driver of client spend and return visitation. Gas prices aren't a major issues for most of their properties since their customers are local. For most of their customers, what's happening in the equity markets is not a big driver.
  • Vietnam: expect a lot of customers to come from China, Thailand, and S Korea
  • Growth in St Louis is not just coming from CZR's former customers
  • Demand that they see in Baton Rouge hotel is mostly weekend. On the weekends, they are finding that they were running out of parking. So they are moving forward with adding more parking. They put in a festival ground where they can do concerts and that's doing great. LSU game impact: their sports bar gets packed an hour beforehand and they get a lot of traffic afterwards. Believe that 200,000 people travel to Baton Rouge for the game. 
  • October trends? They have an unfavorable calendar with one less Saturday. 
  • Is the slight increase in spend per visit driven by mix? Yes, strength is coming largely from their top 3 tiers.



  • 8.0% YoY EBITDA growth was "driven by record L'Auberge Lake Charles results, strong St. Louis performance and the opening of L'Auberge Baton Rouge."
  • "Management estimates the impact from Hurricane Isaac negatively affected Adjusted EBITDA of the Company's Louisiana operating properties by $1.6 million in the 2012 third quarter. In addition, 2012 third quarter Consolidated Adjusted EBITDA included $0.7 million of severance and relocation charges. Adjusting for these factors, Consolidated Adjusted EBITDA for the 2012 third quarter would have been $76.4 million."
  • "Adjusted income per share, which normalizes for the effect of pre-opening expenses and other non-recurring items, increased $0.05 or 20% year over year to $0.30"
  • "Through October 23, 2012, the Company has repurchased 3.5 million shares of its common stock for $40 million under its $100 million share repurchase program"
  • "The Company is progressing toward an agreement to dispose of its land holdings in Atlantic City and expects to enter into a definitive agreement by year end. Separately, the Company expects to receive approximately $2.6 million from the New Jersey Casino Reinvestment Development Authority for the redemption of bond credits. In the 2012 third quarter, the Company recorded a non-cash impairment charge of $6.9 million related to its Atlantic City assets, which is included in Discontinued Operations."
  • "On September 5, 2012, the Company was refunded its $25 million completion guarantee deposit by the Louisiana Gaming Control Board upon the L'Auberge Baton Rouge opening."
  • "In August 2012, the Company entered into a Subscription Agreement and Amended and Restated Shareholders Agreement related to its investment in ACDL. The agreement provides that the Company invests $15.6 million in convertible preferred stock of ACDL or its pro-rata 26% share of a previously disclosed total capital raise by ACDL of $60 million."
  • "On July 2, 2012 the Company closed the acquisition of Heartland Poker Tour."
  • "So far, we are very pleased with the performance of L'Auberge Baton Rouge. The property is well on its way to establishing itself as a high quality regional gaming and entertainment destination. Since opening, the property has achieved over 48,000 mychoice player loyalty card sign-ups, over 267,000 casino admissions, and very strong non-gaming revenue performance."
  • L'Auberge Lake Charles: "Performance was driven by record gaming and cash non-gaming revenues, as well as more efficient marketing, and occurred despite disruption to business volumes from Hurricane Isaac."
  • St Louis: "Performance was driven by more efficient marketing and general operating expense discipline." 
  • "Belterra's 2012 third quarter performance was driven by a focus on removing non-value added expenses from the business."
  • "New Orleans performance was negatively impacted by Hurricane Isaac and generally difficult market conditions. Notwithstanding the hurricane impact, underlying property trends improved throughout the third quarter."
  • "We are dissatisfied with the performance of Boomtown New Orleans and are in the process of implementing changes to the property's operating strategy to drive profitable revenue growth. We are confident, through key operating changes, in our ability to improve New Orleans' performance in the coming quarters."
  • "The reduction in 2012 third quarter corporate overhead expense was driven principally by efforts to eliminate non-value added expenses at the Company's Las Vegas headquarters, as well as a ramp up of cost savings and property allocations related to the Company's shared service centers supporting our properties in the Midwest and Louisiana."
  • River Downs: "Our plans call for a gaming entertainment facility comprising approximately 1,600 video lottery terminals, multiple food and beverage outlets, over 1,600 parking spaces and new racing facilities. We expect the project to cost $209 million, excluding license fees, original acquisition costs and capitalized interest, and plan to open the facility in the first half of 2014."
  • "We continue to make progress on our expansion of River City in St. Louis. The 1,600 space parking structure is nearing completion and is expected to open by the Thanksgiving holiday weekend next month. Construction of the second phase of this expansion, a 200-room hotel and multi-purpose event center, has commenced with an expected completion date in the second half of 2013."
  • "In New Orleans, construction of a $20 million, 150-room hotel is expected to begin by the end of 2012 and is targeted for completion by the end of 2013."
  • "ACDL continues to make significant progress with Phase 1A of the MGM Grand Ho Tram project in Vietnam and the property remains on track to open by the end of first quarter 2013."
  • 3Q Capital expenditures: $102.8MM, including 
    • $81.2MM related to L'Auberge Baton Rouge
    • $9.8MM for the River City expansion
  • "Capitalized interest in the 2012 third quarter was $6.0 million versus $2.9 million in the prior year period."


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