The economy seems to be getting stronger and stronger.
Unemployment is on its way down. The stock market (S&P 500) is
making all-time highs, so is it time to take a gamble?
I'm not talking about any gamble, I want a calculated gamble.
One that will pay off because times are getting better and that
means there is likely to be more disposable cash on hand. Where
do people go (and lose or) spend disposable cash? VEGAS!
Let's take a look at 3 stocks that have high Zacks Ranks and
could be worth a gamble.
(MGM - Analyst Report) has been on a
nice run over the last month or so. The stock has jumped from
about $12 and is now looking to test the $16 range and that move
may be the start of even better things to come.
A big reason for the move was the most recent earnings report.
The company reported its first profit in more than 7 quarters,
and did so with the Zacks Consensus Estimate calling for a loss
of $0.10 per share in the quarter. By reporting $0.03 MGM
delivered a 130% positive earnings surprise.
This swing into the black has inspired analysts to move earnings
estimates for the casino operator significantly higher. Only
six months ago, analysts were calling for a loss of $0.50 for
2013. Estimates have moved up since then, but really jolt higher
from a loss of $0.27 to a loss of $0.06 following the most recent
Similarly the Zacks Consensus Estimate for 2014 moved from a loss
of $0.024 in November 2012 to the current level of a gain of
$0.10. Just one month ago, the consensus was look for a loss of
$0.09 in 2014, so the prospects look that much better.
MGM is a Zacks Rank #1 (Strong Buy).
Las Vegas Sands
sticking with the idea of top ranked casino and gambling stocks I
have Las Vegas Sands
(LVS - Analyst Report) up next. While
MGM just kicked into profitability, LVS has been there for some
The big idea is that LVS just reported its first positive
earnings surprise in a year. On May 1, the company reported $0.71
when the Zacks Consensus was calling for $0.66. That five cent
beat translates into a 7.6% positive earnings surprise. Prior to
that report, the company had a string of three straight misses.
The better than expected sent analysts back to their models
looking increase revenue and earnings estimates. Positive
earnings estimates revisions really aren't that new to LVS, and
since November of 2012 the Zacks Consensus Estimate has been
ticking higher every other month. Starting at $2.61 in November,
the consensus edged higher to $2.70 at the end of April. With
the recent beat, the estimate now stands at $2.79.
The Zacks Consensus Estimate for 2014 also ticked higher over the
same time horizon. Starting at $3.03 in November 2012, the less
populated number has since ballooned to $3.20. The implied
earnings growth rate stands at 14.7%, and for a stocks the size
of LVS ($48 billion) that is no small achievement.
LVS is a Zacks Rank #2 (Buy).
International Game Tech
The final gamble I am looking at is International Game
(IGT) this is more
of a supply chain provider to the casino's but it still fits in
the overall scheme of a gambler's stock pick.
IGT has seen three straight positive earnings surprises, and has
beat the number in four of the last five quarters. That is a
goof think, but when we see the size of the last there beats in
percentage terms have been 18.8%, 16.7% and 20% respectively, we
have to get excited. Those are solid beats of size by a company
that is followed by 13-17 analysts depending on the quarter.
Those beats haven't turned into that much in the way of estimate
revisions. Starting in November 2012, the Zacks Consensus
Estimate called for $1.23 and since moved higher to $1.31. Nearly
the same move for 2014 estimates which moved from $1.28 to $1.33.
Despite the solid history of beating the number the analysts are
not letting 2014 estimates grow.
My limited experience with Casino's tells me that a big portion
of the money made comes from the slots, and as a maker of the
slots, IGT will always have a place in the gamblers stock picks.
The thing to look for is a consistent replacement rate on the
slots, and that will be an indication that the company could be
set to see higher revenues.
Gamble? Not with the Zacks Rank
Just because this stocks are related to the gaming / gambling,
one should not think that they are a roll of the dice. These
stocks all have high Zacks Ranks, which looks for increasing
The idea of a stronger economy, more disposable cash and well
performing casino stocks is good for the prospects of the overall
market. If casino's are doing well, then there is confirmation
of a number of other businesses doing well.
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Brian Bolan is a Stock Strategist
Zacks.com. He is the Editor in charge of the Zacks Home Run Investor
service, a Buy and Hold service where he recommends the
stocks in the portfolio.
Brian is also the editor of Breakout GrowthTrader
trading service that focuses on small cap stocks and also carries
a risk limiting strategy.
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