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Casino-resort operator MGM Resorts International (MGM - Analyst Report) is scheduled to report third quarter 2013 earnings on Oct 31, 2013. Last quarter, MGM Resorts posted a positive earnings surprise of 300.0%. Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that MGM 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 +300.0%. This is meaningful and a leading indicator of a likely positive earnings surprise for the shares.

Zacks Rank #3 (Hold): MGM carries a Zacks Rank #3 (Hold). 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 MGM’s Zacks Rank #3  and a positive ESP of +300.0% makes us confident of an earnings beat on Oct 31.

What is Driving the Better-than-Expected Earnings?

MGM Resorts has benefited immensely from improving gaming trends in both Las Vegas and Macau in the recent times.

Solid retail booking and moderate growth in convention room nights in Las Vegas are expected to drive the results in the third quarter. Increased casino gaming activity will also likely be responsible for growth in the upcoming quarter.

MGM derives a solid share of its revenues from Macau, one of the largest gaming destinations in the world. The VIP business in Macau, which witnessed a slowdown owing to a weakening Chinese economy, appears to be back on track since the fourth quarter of 2012. A positive trend in Macau is expected, buoyed by a gradual recovery in VIP gaming, upgrades to main gaming floor products, marketing initiatives as well as substantial growth in Macau mass market gaming revenues.

Other Stocks to Consider

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

Melco Crown Entertainment Limited (MPEL - Snapshot Report), Earnings ESP of +6.45% and a Zacks Rank #1 (Strong Buy).

Bally Tech Inc. (BYI - Snapshot Report), Earnings ESP of +1.11% and a Zacks Rank #3 (Hold).

Penn National Gaming Inc. (PENN - Snapshot Report), Earnings ESP of + 2.38% and a Zacks Rank #3 (Hold).

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