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4 Gaming Stocks Likely to Sport an Earnings Beat in Q1
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The curtains have been raised on the first-quarter earnings season and investors are glued to quarterly releases, looking for stocks that are poised to beat on earnings.
Market pundits are of the view that a company’s earnings performance is possibly the most important factor influencing its stock price.
No wonder then, in the world of finance, earnings is indeed both literally and figuratively “the bottom line”.
Focus on Gaming Stocks
People keep flocking to casinos enamored by the game of chance, with the aspiration of winning it big and the desire to let loose. This makes destinations like Las Vegas and Macau gambling hotspots. In fact, the allure of entertainment and gambling, in both hotels and casinos, has aided these cities to form a tourism economy, unlike any other place in the world.
Casino players’ properties in Vegas are continuing to cash in on the favorable trends of an improving employment rate and positive tourism numbers for quite some time. In this context, the Las Vegas Strip has been recording high occupancy rates over the past few years.
However, a tough operating environment in Macau weighed on casino stocks in 2015 and for the most part of 2016. In fact, since Jun 2014, gaming revenues in Macau have been declining, due to the crackdown on corruption in China. This compelled Macau officials to impose restrictions on high rollers to stop billions of dollars from being siphoned off illegally from China to Macau. Consequently, this lowered footfall at the local casinos. A slowdown in China, tighter visa policies, political unrest and a smoking ban on mass market gaming floors also compounded the woes.
However, Macau's gambling revenues have been rising since second-half 2016 with new resorts attracting high rollers and leisure gamblers. Evidently, efforts undertaken by Macau operators to revive revenues by wooing tourists and recreational gamblers by providing family-friendly resorts and more non-gaming facilities have started yielding results. In fact, the rise in March marked the eighth consecutive month of gain, thereby indicating that the casino hub is on its path to recovery.
Though it seems that the worst is over for Macau’s gambling industry, concerns related to the sustainability of revenues from the VIP market lingers. This suggests that it will take some time for the region to return to its former glory. Nevertheless, the bouncing back of Macau revenues has given the much-needed impetus to the casino sector.
Expectations for Q1
The Zacks categorized Gaming industry belongs to the broader Consumer Discretionary sector. Per the latest Earnings Preview, overall earnings for the sector in first-quarter 2017 are expected to be up 3.7% year over year and revenues are likely to surge 11.2%. During the fourth-quarter 2017, the sector witnessed an improvement of 10.1% and 12.1% in earnings and revenues, respectively.
Thus, as the broader Consumer Discretionary sector is poised to come up with flying colors this earnings season on an improving job scenario and increasing consumer confidence, the gaming industry within the sector is also set to gain from the optimism.
So, let’s take a look at some companies in the gaming space that have the potential to beat earnings in their upcoming first-quarter releases. In spite of the headwinds, these stocks are well positioned in today’s market environment, and could see considerable upside riding on the positive trends across the industry. Further, an earnings beat should help these stocks gain investor confidence and pave the way for stock price appreciation. Thus, these stocks could turn out to be great additions to your portfolio ahead of their earnings releases.
How to Screen the Outperformers?
Choosing the most rewarding stocks within the industry might be a difficult task unless one knows the process to shortlist. One way to confine the list of choices this earnings season is by looking at stocks that have a solid Zacks Rank accompanied by a favorable Earnings ESP.
Earnings ESP is our proprietary methodology for determining which stocks have the best chance to pull a surprise in their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
The combination of a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP is usually an indication of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our research show that for stocks with this combination has the chance of a positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
4 Key Picks
For investors seeking to apply this strategy to their portfolio, below are the four gaming stocks that have the right combination of elements to deliver positive earnings surprises in their upcoming announcements:
MGM Resorts International (MGM - Free Report) is a holding company that primarily owns and operates casino resorts through wholly owned subsidiaries. The company reports through two operating segments: Wholly-owned Domestic Resorts and MGM China. The company’s recently unveiled entertainment offerings along with its pipeline projects are expected to increase profitability across its properties, going forward.
Wynn Resorts Ltd. (WYNN - Free Report) , one of the leading companies in the gaming and lodging industry, is well poised to grow strategically. The company’s improved non-gaming revenues, efforts to boost tourism in Macau and expansion in domestic market are expected to continue driving growth.
Zacks Rank #2 Earnings ESP: +5.41% Trailing four-quarter average earnings surprise: +2.20% Expected Earnings Release Date: May 4
Las Vegas Sands (LVS - Free Report) is a leading international developer of multi-use integrated resorts primarily operating in the United States and Asia. The company’s solid business model, extensive non-gaming revenue opportunities, high quality assets and attractive property locations bode well. It seems to be particularly positive on its new resort, The Parisian Macao, which should continue to boost revenues.
Penn National Gaming, Inc. (PENN - Free Report) is a diversified gaming and pari-mutuel wagering company. Its business strategy is focused on exploiting the higher margins and more stable cash flows associated with gaming operations compared to pari-mutuel operations.
Thus, we believe that keeping an eye on these companies that have a potential of an earnings beat by virtue of their favorable Zacks Rank, positive earnings ESP, strong fundamentals and Macau rebound could be a great idea for investors to tap into the optimism in the space.
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>
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4 Gaming Stocks Likely to Sport an Earnings Beat in Q1
The curtains have been raised on the first-quarter earnings season and investors are glued to quarterly releases, looking for stocks that are poised to beat on earnings.
Market pundits are of the view that a company’s earnings performance is possibly the most important factor influencing its stock price.
No wonder then, in the world of finance, earnings is indeed both literally and figuratively “the bottom line”.
Focus on Gaming Stocks
People keep flocking to casinos enamored by the game of chance, with the aspiration of winning it big and the desire to let loose. This makes destinations like Las Vegas and Macau gambling hotspots. In fact, the allure of entertainment and gambling, in both hotels and casinos, has aided these cities to form a tourism economy, unlike any other place in the world.
Casino players’ properties in Vegas are continuing to cash in on the favorable trends of an improving employment rate and positive tourism numbers for quite some time. In this context, the Las Vegas Strip has been recording high occupancy rates over the past few years.
However, a tough operating environment in Macau weighed on casino stocks in 2015 and for the most part of 2016. In fact, since Jun 2014, gaming revenues in Macau have been declining, due to the crackdown on corruption in China. This compelled Macau officials to impose restrictions on high rollers to stop billions of dollars from being siphoned off illegally from China to Macau. Consequently, this lowered footfall at the local casinos. A slowdown in China, tighter visa policies, political unrest and a smoking ban on mass market gaming floors also compounded the woes.
However, Macau's gambling revenues have been rising since second-half 2016 with new resorts attracting high rollers and leisure gamblers. Evidently, efforts undertaken by Macau operators to revive revenues by wooing tourists and recreational gamblers by providing family-friendly resorts and more non-gaming facilities have started yielding results. In fact, the rise in March marked the eighth consecutive month of gain, thereby indicating that the casino hub is on its path to recovery.
Though it seems that the worst is over for Macau’s gambling industry, concerns related to the sustainability of revenues from the VIP market lingers. This suggests that it will take some time for the region to return to its former glory. Nevertheless, the bouncing back of Macau revenues has given the much-needed impetus to the casino sector.
Expectations for Q1
The Zacks categorized Gaming industry belongs to the broader Consumer Discretionary sector. Per the latest Earnings Preview, overall earnings for the sector in first-quarter 2017 are expected to be up 3.7% year over year and revenues are likely to surge 11.2%. During the fourth-quarter 2017, the sector witnessed an improvement of 10.1% and 12.1% in earnings and revenues, respectively.
Thus, as the broader Consumer Discretionary sector is poised to come up with flying colors this earnings season on an improving job scenario and increasing consumer confidence, the gaming industry within the sector is also set to gain from the optimism.
So, let’s take a look at some companies in the gaming space that have the potential to beat earnings in their upcoming first-quarter releases. In spite of the headwinds, these stocks are well positioned in today’s market environment, and could see considerable upside riding on the positive trends across the industry. Further, an earnings beat should help these stocks gain investor confidence and pave the way for stock price appreciation. Thus, these stocks could turn out to be great additions to your portfolio ahead of their earnings releases.
How to Screen the Outperformers?
Choosing the most rewarding stocks within the industry might be a difficult task unless one knows the process to shortlist. One way to confine the list of choices this earnings season is by looking at stocks that have a solid Zacks Rank accompanied by a favorable Earnings ESP.
Earnings ESP is our proprietary methodology for determining which stocks have the best chance to pull a surprise in their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
The combination of a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP is usually an indication of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our research show that for stocks with this combination has the chance of a positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
4 Key Picks
For investors seeking to apply this strategy to their portfolio, below are the four gaming stocks that have the right combination of elements to deliver positive earnings surprises in their upcoming announcements:
MGM Resorts International (MGM - Free Report) is a holding company that primarily owns and operates casino resorts through wholly owned subsidiaries. The company reports through two operating segments: Wholly-owned Domestic Resorts and MGM China. The company’s recently unveiled entertainment offerings along with its pipeline projects are expected to increase profitability across its properties, going forward.
Zacks Rank #3
Earnings ESP: +11.54%
Trailing four-quarter average earnings surprise: +159.15%
Expected Earnings Release Date: Apr 27
Wynn Resorts Ltd. (WYNN - Free Report) , one of the leading companies in the gaming and lodging industry, is well poised to grow strategically. The company’s improved non-gaming revenues, efforts to boost tourism in Macau and expansion in domestic market are expected to continue driving growth.
Zacks Rank #2
Earnings ESP: +5.41%
Trailing four-quarter average earnings surprise: +2.20%
Expected Earnings Release Date: May 4
Las Vegas Sands (LVS - Free Report) is a leading international developer of multi-use integrated resorts primarily operating in the United States and Asia. The company’s solid business model, extensive non-gaming revenue opportunities, high quality assets and attractive property locations bode well. It seems to be particularly positive on its new resort, The Parisian Macao, which should continue to boost revenues.
Zacks Rank #3
Earnings ESP: +1.67%
Expected Earnings Release Date: Apr 19
Penn National Gaming, Inc. (PENN - Free Report) is a diversified gaming and pari-mutuel wagering company. Its business strategy is focused on exploiting the higher margins and more stable cash flows associated with gaming operations compared to pari-mutuel operations.
Zacks Rank #2
Earnings ESP: +20.00%
Trailing four-quarter average earnings surprise: +67.45%
Expected Earnings Release Date: Apr 27
To Conclude
Thus, we believe that keeping an eye on these companies that have a potential of an earnings beat by virtue of their favorable Zacks Rank, positive earnings ESP, strong fundamentals and Macau rebound could be a great idea for investors to tap into the optimism in the space.
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>