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Casino-resort operator Wynn Resorts Limited is scheduled to report third quarter fiscal 2013 earnings after markets close on Oct 21, 2013. Last quarter, Wynn Resorts posted a negative earnings surprise of 2.58%. Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Wynn Resorts is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +6.79%. This is meaningful and a leading indicator of a likely positive earnings surprise for the shares.

Zacks Rank #2 (Buy): Wynn Resorts carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1, #2 and #3 have a significantly higher chance of beating earnings estimates. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.

The combination of Wynn’s Zacks Rank #2 (Buy) and a positive ESP of +6.79% makes us confident of an earnings beat on Oct 21.

What is Driving the Better-than-Expected Earnings?

Wynn generates over 70% of its revenues from Macau. The casino boom in Macau, the only Chinese city where gambling is legal and one of the largest gaming destinations in the world, is expected to be the one of the key drivers of its third quarter results. Although, Wynn Macau has experienced weakness in the last three quarters of 2012, the situation seems to have improved buoyed by the mass market boom and will likely benefit the company ahead.

Also, Wynn Resorts is experiencing improved business in Las Vegas as leisure demand continues to improve with the gradual recovery of the U.S. economy. The visitation pattern in Las Vegas is improving and management remains hopeful on the prospective business for the rest of 2013 as average daily rates are trending higher.

Additionally, to boost performance in Las Vegas, the company has remodeled rooms and the baccarat pit at its properties. We expect this trend to boost third quarter sales too.

Other Stocks to Consider

Here are some other companies in the casino and hotel sector that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter:

MGM Resorts International , Earnings ESP of +66.67% and a Zacks Rank #3 (Hold).

Melco Crown Entertainment Ltd , Earnings ESP of +6.45% and a Zacks Rank #1 (Strong Buy).

Hyatt Hotels Corp. , Earnings ESP of + 13.64% and a Zacks Rank #3 (Hold).

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