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Gambling Stock Roundup: Melco Crown Tops & Boyd Gaming Lags Earnings; MGM Resorts Buys Boyd Gaming Stake

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The gambling industry’s focus has been on second-quarter 2016 earnings in the past week.

Both Melco Crown Entertainment Limited and MGM Resorts International (MGM - Free Report) posted mixed results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. In a separate development, MGM Resorts completed the acquisition of a 50% stake in Boyd Gaming Corporation's (BYD - Free Report) Borgata Hotel Casino & Spa.

However, quarterly results for Boyd Gaming were lower than expected for both earnings and revenues. Meanwhile, Churchill Downs Inc. (CHDN - Free Report) beat both top and bottom-line expectations.

On the other hand, Zynga, Inc. posted a loss which was in line with the Zacks Consensus Estimate while revenues were better than expected. Meanwhile, Century Casinos Inc.’s (CNTY - Free Report) earnings lagged the Zacks Consensus Estimate, however, revenues were in line with the consensus mark.

GAMING Industry Price Index

GAMING Industry Price Index

Recap of the Week’s Most Important Stories  

1.    MGM Resorts posted second-quarter 2016 earnings of 26 cents per share which beat the Zacks Consensus Estimate of 21 cents by 23.8%. Earnings also increased 52.9% from the year-ago quarter. However, total revenue of $2.27 billion missed the Zacks Consensus Estimate of $2.36 billion by 3.9% and declined 4.8% year over year. The downside reflects a significant decline in revenues from MGM China (read more: MGM Resorts Beats Earnings, Misses Revenues in Q2).

In a separate development, MGM Resorts and MGM Growth Properties LLC (MGP) announced that MGM Resorts has completed the acquisition of a 50% stake in Boyd Gaming’s Borgata Hotel Casino & Spa.

2.    Meanwhile, Boyd Gaming posted lower-than-expected second-quarter results. Adjusted earnings of 16 cents per share lagged the Zacks Consensus Estimate of 29 cents by 44.8% and decreased 33.3% on a year-over-year basis. Net revenue of $545 million failed to beat the consensus mark of $559 million by 2.5% and declined 2.7% year over year.

An increase in room revenue growth was more than offset by a decrease in gaming, food and beverage and other revenues. Total adjusted EBITDA was $137.9 million, down 1.9% year over year.

3.    Melco Crown reported second-quarter 2016 earnings per share of 5 cents, which outpaced the Zacks Consensus Estimate of 3 cents by 66.7%. On the other hand, quarterly net revenue of $1.07 billion missed the Zacks Consensus Estimate of $1.13 billion by over 5%. However, the figure improved 16.8% on a year-over-year basis, primarily driven by contributions from Studio City as well as higher casino revenues at City of Dreams Manila.

Adjusted Property EBITDA was $245.3 million in the second quarter, up 19.7% year over year. The upside came mainly on the back of increased contribution from the newly launched casino Studio City and fully-operating City of Dreams Manila (read more: Melco Crown Beats Q2 Earnings, Misses Revenues).

4.    Century Casinos posted mixed second-quarter 2016 results with adjusted earnings per share of 9 cents lagging the Zacks Consensus Estimate of 14 cents and declining 66.7% from prior-year quarter figure. The downside reflects a decrease in revenues and an increase in total operating costs and expenses.

Net revenue of $35 million met the consensus mark but lagged the prior-year quarter figure by 7.1%. The results reflect a decrease in Canada as well as corporate and other revenues, partially offset by an increase in revenues in the U.S. and Poland.

5.    Churchill Downs posted better-than-expected second-quarter results with earnings per share of $4.11 surpassing the Zacks Consensus Estimate of $3.93 by 4.6%. It also increased 32.6% year over year owing to an increase in revenues. Net revenue of $438.5 million beat the consensus mark by 1.4% and also increased 7.2% year over year.

The upside reflects additional revenues from Big Fish Games, which the company acquired in Dec 2014, as well as growth in revenues from Casinos, TwinSpires and Racing segments.

Price Performance

The following table shows the price movement of the major gambling stocks over the past week and the last six months:

Company

Last Week

Last 6 Months

WYNN

-0.4%

65.8%

LVS

-0.7%

23.0%

MGM

2.0%

44.9%

MPEL

0.3%

9.2%

CACQ

-4.1%

114.8%

BYD

-3.5%

24.7%

CZR

0.7%

20.3%

Over the last five trading sessions, share price movement of the major gambling stocks witnessed a mixed trend. While MGM Resorts gained the maximum at 2%, Caesars Acquisition Company and Boyd Gaming recorded a decline of 4.1% and 3.5%, respectively.

However, over the last six months, the price performance of the gambling stocks was positive. Among the stocks that appreciated the most were Caesars Acquisition and Wynn Resorts Ltd. (WYNN - Free Report) , witnessing an increase of nearly 114.8% and 65.8%, respectively.

What’s Next in the Gambling Space?

We note that gambling stocks have oscillated between gains and losses in recent sessions and investors can expect this volatility to continue in the coming days.

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