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THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – October 30, 2014


As we look at today's setup for the S&P 500, the range is 111 points or 4.75% downside to 1900 and 0.82% upside to 2011.                                           

                                                                                    

SECTOR PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

EQUITY SENTIMENT:

 

THE HEDGEYE DAILY OUTLOOK - 10

 

CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 1.85 from 1.84
  • VIX closed at 14.52 1 day percent change of -4.16%

 

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30am: Employment Cost Index, 3Q, est. 0.5% (prior 0.7%)
  • 8:30am: Personal Income, Sept., est. 0.3% (prior 0.3%)
  • 9am: ISM Milwaukee, Oct., est. 60 (prior 63.18)
  • 9:45am: MNI Chicago Business (purchasing managers), Oct., est. 60 (prior 60.5)
  • 9:55am: UofMich. Consumer Sentiment, Oct. final, est. 86.4 (prior 86.4)
  • 1pm: Baker Hughes rig count

 

GOVERNMENT:

    • Senate, House out of session
    • President Obama gives speech on the economy
    • Deadline for bids on Pentagon’s $11b electronic health records contract (for March 2015 award)
    • 8:30am: Commerce Dept maunfacturing event; Deputy Commerce Secretary Bruce Andrews to speak at 11:45am
    • U.S. ELECTION WRAP: Trouble With Polling; Ad Spending; Ratings

 

WHAT TO WATCH:

  • Citigroup Legal Costs Jump $600m as FX Probes Accelerate
  • Bank of Japan Boosts Record Stimulus as Abe Eyes Tax Rise
  • Oil Set for Biggest Monthly Drop Since ’12 on Oversupply
  • Russia Agrees to Terms With Ukraine for Gas Supply to Resume
  • Trading in Xetra Is Suspended, Deutsche Boerse Says
  • Ex-UBS Trader Defense Is Possible Threat to U.S. Forex Cases
  • Android Co-Founder Rubin Leaving Google to Form Incubator
  • Twitter Said to Appoint Head of Product as User Growth Slows
  • Disaster Averted in NYSE Stocks as Price Feed Backup Kicks In
  • Starbucks Sales Trail Estimates Amid U.S. Breakfast Rivalry
  • LinkedIn New Businesses Lift 3rd-Quarter Sales Above Estimates
  • Square’s Card-Reader Market Sway Slips as PayPal, Amazon Loom
  • Alibaba Co-Founder Said to Back Hedge Fund of Ex SAC Trader
  • BlackRock Says ETFs Aided Bond Mkt Stability After Gross Exit
  • U.S. Midterm Elections, Jobs, ECB, BOE, AIG: Wk Ahead Nov. 1-8

 

EARNINGS:

    • AbbVie (ABBV) 7:47am, $0.77 - Preview
    • American Axle & Mfg (AXL) 8am, $0.62
    • Aon (AON) 6:30am, $1.12
    • CBOE (CBOE) 7:30am, $0.54
    • Chevron (CVX) 8:30am, $2.52 - Preview
    • Clorox (CLX) 8:30am, $1.03 - Preview
    • CommScope (COMM) 7:30am, $0.57
    • Dominion Resources (D) 7:30am, $0.95
    • Exelis (XLS) 6:30am, $0.32
    • Exxon Mobil (XOM) 8am, $1.71 - Preview
    • Genesee & Wyoming (GWR) 6am, $1.18
    • Hilton Worldwide (HLT) 6am, $0.17
    • ITT (ITT) 7am, $0.60
    • Legg Mason (LM) 7am, $0.01
    • Madison Square Garden (MSG) 7:30am, $0.32
    • Magellan Midstream Partners (MMP) 8:30am, $0.66
    • Moog (MOG/A) 7:55am, $1.08
    • Newell Rubbermaid (NWL) 6:30am, $0.55 - Preview
    • NextEra Energy (NEE) 7:30am, $1.54
    • Oshkosh (OSK) 7am, $0.82
    • Pinnacle West Capital (PNW) 8:30am, $2.13
    • Rockwell Collins (COL) 7:30am, $1.27
    • Spirit AeroSystems (SPR) 7:30am, $0.77
    • TECO Energy (TE) 7:30am, $0.33
    • Telephone & Data Systems (TDS) 7:56am, ($0.08)
    • United States Cellular (USM) 7:57am, ($0.30)
    • Vantage Drilling (VTG) 6am, $0.02
    • WisdomTree (WETF) 7am, $0.07

 

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Gold Tumbles With Silver to Lowest Since 2010 as Dollar Advances
  • Brent Oil Set for Longest Run of Weekly Losses Since ’02 on Glut
  • Gold Slumping 17% to $1,000 an Ounce for SocGen on Oil’s Tumble
  • Nickel Leads Gains by Industrial Metals as Japan Adds Stimulus
  • No Guarantee Saudis to Repeat Price Cut That Drove Oil Lower
  • Hurricane Season’s Eastern Pacific Finale Sends Storm to Mexico
  • Shale Boom Redraws Oil Routes as Alaskans Ship to Korea: Energy
  • Russia Agrees to Terms With Ukraine for Gas Supply to Resume
  • Emerging-Market Currencies Hurt by Oil, Metals: Chart of the Day
  • Wheat Futures Drop as Much as 1% to $5.305/bu, Reversing Gains
  • Steel Rebar Pares Monthly Gain as Demand Seen Falling in Winter
  • Freeport Indonesia, Labor Union Continue Talks on Planned Strike
  • Copper Traders Bullish for Next Week Amid Distruption Prospects
  • ‘Brouhaha’ Looming Over OPEC Oil-Production Cuts, Yergin Says

 

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES


THE HEDGEYE DAILY OUTLOOK - 6

 

GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EUROPEAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST

 

THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 


October 31, 2014

October 31, 2014 - Slide1

 

BULLISH TRENDS

October 31, 2014 - Slide2

October 31, 2014 - Slide3

October 31, 2014 - Slide4

 

 

BEARISH TRENDS

October 31, 2014 - Slide5

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October 31, 2014 - Slide7

October 31, 2014 - Slide8

October 31, 2014 - Slide9

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October 31, 2014 - Slide11
October 31, 2014 - Slide12

October 31, 2014 - Slide13


BYD 3Q 2014 CONFERENCE CALL NOTES

Takeaway: Our positive regional call is likely to extend a little longer with decent October #s coming out and, of course, the REIT euphoria

Consistent with our earnings preview, another regional operator beats. Stock should be on steroids tomorrow due to the conference call REIT discussion

 

 

CONF CALL

  • Southern Nevada economy continues to strengthen
  • Gold Coast/the Orleans did particularly well
  • Las Vegas:  Non-gaming amenities demand is increasing
  • Downtown:  seeing benefits from Fremont Street and new Zipline experience; also benefited from increased Hawaii visitation
  • Regionals:  margins were up at 9 of 12 properties.  YoY revenue declines are narrowing.  
  • Delta Downs:  record 3Q EBITDA (beating previous record by 10% and gained share).  While there will be an impact from Golden Nugget Lake Charles later in 2014, they remain confident Delta Downs EBITDA will grow 6% YoY.
  • IP EBITDA operating margins grew 170bps.  Blue Chip grew market share in each month in 3Q.  Strong visitation growth (+5%) for Blue Chip.  
  • Kansas Star EBITDA down 5% on lower revenues.  43% operating margin. Spend per visit up slightly but declines from visitation from casual players.
  • Par-a-dice impacted by the new 18k VLTs
  • Borgata:  hotel business also strong driven by cash rates.  Closure of competitors have resulted in a bigger customer database.  Also saw additional convention business and better occupancy since early Sept.
  • Borgata online:  profitable throughout 3Q.  Expect further improvement in 4Q.
  • Goals:  1) Reduce debt,  2) target property initiatives (e.g. opened sports bar at SunCoast, in December will update 400 rooms at SunCoast, new Asian restaurant in Downtown hotel, hotel work in IP will be done by January 2015, Kansas Star expansion will be done by end of 2014 - drive higher visitation by 2015), 3) long-term shareholder value (REIT conversion/spin study) 
  • Reduced debt by $70m in 3Q; solidly on track to repay $200m debt in 2014 (YTD: $165m).  Have reduced debt by $700mm since 2013.
  • Potential REIT possibility: have spent $3m studying this....it's possible with certain circumstances.
  • 3Q capex: $41m - $9m (peninsula), $3m borgata); YTD: $95m
  • FY2014 capex: $110m (Boyd/Peninsula), $25m (Borgata)
  • FY 2014 EBITDA guidance: $590-600m (high end of previous guidance)
    • under Borgata deconsolidated basis, FY EBITDA guidance:  $576-586m
  • Guidance assumptions:
    • Normal weather
    • Current trends continue
    • Normal hold at Borgata (low hold in 4Q 2013)
    • No Downtown $2m favorable tax items seen in 4Q 2013),
    • No Midwest/South $9.3m tax benefit for Blue Chip in 4Q 2013
    • Adverse Golden Nugget Lake Charles impact.  Previously, had not included its impact 
    • Peninsula:  expect YoY EBITDA trends in 3Q to continue in 4Q
    • Borgata:  4Q ($7m property tax reductions)
    • Borgata items not in guidance:  2 remaining tax appeals (one-time $88m (2011-2013 property tax settlement- will be used to reduce debt), 2010 tax refund being appealed by city of AC

 

Q & A

  • Regional trends:  still more of the same consumer environment but getting less bad.
  • Las Vegas Locals:  all the growth came from non-gaming, broad-based across the properties.  Gaming revenue was flattish.
  • Resorts World Genting haven't started construction yet.  
  • There are not enough construction workers available for some of the Vegas projects.
  • Atlantic City strategy: picking up business in conventions and nightlife.  Will not overspend to capture new customers as a result of the closures
  • REIT:  not saying yes or no at this point; it would be obvious if we are going to go in a different direction
  • How did 3Q compare to BYD's internal guidance?  Generally performed in the middle of the range.
  • Sept 2014 was less bad than Sept 2013
  • December was very weak last year
  • Possible Revel re-opening?  Would bring more customers to the market.
  • Pokerstars entering NJ I-gaming?  no comment. Pokerstars is involved with NJ authorities.
  • Lower gas prices impact:  historically, have seen fairly quick reactions but people react less nowadays
  • AC bond issue for tax refund:  expect by at year-end
  • Delta Downs impacted by lower oil prices?  Too early to tell.  Oil price changes are transitory.
  • IP:  market is flat/up a little bit but the property is competing better. Focused on EBITDA.
  • As managing partner, BYD would recommend to MGM to refinance 9% 7/8 Borgata debt. 
  • Tribal/Native gaming opportunities:  a few years into the future

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HILTON: TRICK OR TREAT - A LITTLE OF BOTH

CALL TO ACTION

Hilton Worldwide will report Q3 2014 results tomorrow and we expect another beat and raise event (the treat).  However, we also very shortly expect a Halloween surprise – a secondary equity offering of 90 million shares by Blackstone (the trick). We reiterate our positive view on Hilton and the lodging sector but remind investors to be sensitive to event timing.

 

Please see our note 

http://docs.hedgeye.com/HE_HILTON_TrickOrTreat_10.30.14.pdf


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