We’re projecting 8-12% YoY growth in Strip revenues assuming fairly normal hold. WYNN was likely the standout.
Based on McCarran Airport traffic volume growth of 2.2% and our statistical analysis, we believe the Strip will post solid growth for March, despite very high slot hold last year. Table volume and revenues should drive the upside. This would represent a turnaround from February when the Strip was down 10%. We believe WYNN may have captured outsized market share on the high end tables and our EBITDA estimate of $87 million remains the highest on the Street for Wynn/Encore Las Vegas.
WYNN is reporting tonight and its likely strong Las Vegas performance should be good for MGM’s stock. Moreover, if these Nevada gaming revenues are where we think they are, that also should be a positive catalyst for MGM, assuming they are released in May before MGM reports earnings. However, we’re don’t think MGM performed nearly as well as WYNN on the gaming side in Q1 so the actual earnings release could disappoint some of the MGM bulls.
Here are our projections:
MAR was the first chink in the lodging armor but HST might be the biggest. We remain worried about Q2 RevPAR.
HST’s Q1 results may disappoint the sell side bulls, some of whom have EBITDA estimates in excess of $180MM. The company will report the quarter on April 28th. We’re projecting $147MM of Adjusted EBITDA, 14% below consensus of $171MM and FFO of $0.11 cents, 1 cent below the Street.
Looking forward, we’re also 9% below the Street’s 2011 EBITDA estimate, which happens to be above the high end of company’s guidance of $1.035BN. Expectations, both formal and informal, may have gotten too aggressive. Q2 and Q3 remain our chief concerns. We don’t believe the Street is reflecting the truly difficult comps from the May through July period of 2010. As we’ve written about, absolute dollar RevPAR may have been boosted by pent up demand and it appears statistically that dollar RevPAR has slowed sequentially since then on a seasonally adjusted basis. We’re about 12% below the Street for Q2 and Q3 EBITDA.
We estimate that HST will report 1Q2011 revenue of $929MM and $168MM of Property level EBITDAR (margin expansion of 150bps YoY)
- Property level revenue of $867MM
- Total RevPAR growth of 9.2% to $119
- Room revenue of $535MM, +10.5% YoY
- F&B revenue of $272MM, +8% YoY
- Other revenue of $60MM, +5% YoY
- $664MM of property level expenses
- CostPAR increase of 3%, producing estimated room expenses of $149MM
- F&B expenses of $199MM
- An 8% increase in hotel departmental expenses to $240MM
- Other property level expenses of $75MM, a 3% YoY increase or a CostPAR decrease of 1.5%
- Corporate expense of $26MM
- D&A of $139MM
- Net interest expense of $86MM
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Notable news items and price action from the past twenty-four hours, as well as our fundamental view on select names.
- EAT price target raised to $28 by JPM, based on low valuation relative to peers and an upwardly revised 2012 EPS target.
- EAT was downgraded to “Negative” from “Neutral” at Susquehanna. The twelve-month price target is $20 per share.
- EAT declined 2.7% on accelerating volume yesterday.
- MCD market share gains are likely to continue, according to Janney Montgomery. The note cites a report by Technomic, a foodservice industry consultant, on annual market share figures for 2010.
- RRGB overhauled its menu, implementing a 1.5% price increase and resurrecting several dishes that had been removed from the menu.
- AFCE’s Popeye’s Louisiana Kitchen announced that the Popeyes restaurant system achieved supply chain cost savings of approximately $16 million in 2010.
- SBUX launched its tenth annual Global Responsibility Report, which outlines fiscal 2010 performance in ethical sourcing, environmental stewardship, and community development.
- PZZA was cut to “Hold” at Stifel Nicolaus.
- KONA gained 1.7% on accelerating volume.
TODAY’S S&P 500 SET-UP - April 15, 2011
As we look at today’s set up for the S&P 500, the range is 9 points or -0.32% downside to 1301 and 0.37% upside to 1310.
SECTOR AND GLOBAL PERFORMANCE
We now have 5 of 9 sectors positive on TRADE and 8 of 9 sectors positive on TREND.
- ADVANCE/DECLINE LINE: -1182 (-1105)
- VOLUME: NYSE 1042.27 (+0.20%)
- VIX: 16.96 +10.70% YTD PERFORMANCE: -4.45%
- SPX PUT/CALL RATIO: 1.80 from 2.11 (-14.69%)
CREDIT/ECONOMIC MARKET LOOK:
- TED SPREAD: 22.305
- 3-MONTH T-BILL YIELD: 0.07%
- 10-Year: 3.40 from 3.43
- YIELD CURVE: 2.71 from 2.72
MACRO DATA POINTS:
- 8:30 a.m.: Building Permits, est. 540k, prior 517k
- 8:30 a.m.: Housing Starts, est. 520k, 479k
- 11:00 a.m.: EU’s Barnier speaks at Banker’s conference in Brussels
- 04:30 p.m.: API U.S. Crude Oil Inventories, est. 1187k
WHAT TO WATCH:
- Earnings: IBM, INTC, JNJ, GS, YHOO, WYNN, STX, PCAR, ISRG
- Economic: March housing starts, building permits
- Other: 11am Energy Department, Office of Fossil Energy meeting of Ultra-Deepwater advisory committee
- Default Swaps Drop as Plant Cools, S&P Warns U.S.: Japan Credit
- Greece Sells Bills as Two-Year Yield Tops 20%: Euro Credit
COMMODITY HEADLINES FROM BLOOMBERG:
- China Crops in Shortest Supply as Vanishing Farms Spur Rising Food Futures
- Oil Falls for a Second Day as Economic Outlook Prompts Fuel Demand Concern
- Copper Rises, Rebounding From Losing Streak, on Robust China Manufacturing
- Wheat Advances for a Third Day on Deteriorating Crop Conditions in U.S.
- Gold, Near $1,500 an Ounce, Trades Little Changed in London; Silver Slips
- Coffee Climbs on Speculation of Winter Crop Damage in Brazil; Cocoa Falls
- Zinc Production in Japan Drops as Imports Set to Increase to 10-Year High
- Sugar, Rice Output to Gain as India Predicts Normal Rain for Second Year
- Gold May Reach Record $1,520, Sarin of Barclays Says: Technical Analysis
- Steel Demand in Japan to Slow as Carmakers Cut Operations, Federation Says
- Oil Bets at $80 Soar After Prices Approach Three-Year High: Energy Markets
- Alumina Says Some Customers Are Balking at Change to Short-Term Cash Price
- China Helps Domestic Seed Makers With Tax Breaks to Ensure Grain Security
- U.S. Feedlots Purchase More Cattle Because of Drought, According to Survey
- European Stocks Rebound From Biggest Decline in a Month; LVMH, SKF Advance
- Vedanta Said to Buy 11% of Cairn India From Petronas in $2.1 Billion Deal
- European Services, Manufacturing Growth Unexpectedly Accelerates in April
- J&J-Synthes Merger Obscures Product Recalls in Instant Makeover: Real M&A
- Greek Default Drive Risks Reviving Euro-Region Contagion as Bonds Plunge
- Wellink Calls ECB Rate Increase a Signal to Anchor Inflation Expectations
- Novartis Rises as Profit, Sales Beat Estimates on Generic Lovenox, Gleevec
- Tesco Full-Year Profit Rises Less Than Estimated as Quarterly Sales Drop
- Frankfurt Cargo Suggests German Export Growth Will Slow: Chart of the Day
- Bahrain Sukuk Beaten This Year by Emerging Debt on Unrest: Islamic Finance
- Italy Shelving Nuclear Means Fiat to Keep Paying Most for Power in Europe
- Kengeter Plan Thwarted at UBS Spurs Gruebel Cuts to Buoy Return on Equity
ASIA PACIFIC MARKETS:
- Asia Stocks Fall For Third Day as U.S. Credit Outlook Cut; Cnooc Retreats
- Euro Advances Versus Dollar, Yen as Data Points to Higher Interest Rates
- Seagate to Buy Samsung’s Hard-Disk Unit for $1.38 Billion, Build Alliance
- Apple Claims Samsung Copies IPhone, IPad in Galaxy Phone, Tablet Products
- Bank Risk Rises Most Since January on Fitch Bad-Debt Warning: China Credit
- Foreign Direct Investment in China Surges 33% as Zhou Sees Excess Reserves
- Nuclear Power Bond Tests Confidence in World's Biggest Plant: India Credit
- Google, Itochu, Sumitomo Buy Stake in $2 Billion Wind-Power Farm in Oregon
- BRIC Stocks' Longest Rally Since 1997 Seen Doomed as Interest Rates Rise
- Chinese Developers Soar In Hong Kong as Sales Defy Curbs: Chart of the Day
- Asahi Bicycle Sales Double as Commuters Haunted by Quake Seek Alternative
- China Crops in Shortest Supply as Vanishing Farms Spur Rising Food Futures