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MGM Resorts (MGM) Q2 Earnings: Will Macau Hurt Results?
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MGM Resorts International (MGM - Free Report) is set to report second-quarter 2016 results on Aug 4, before the opening bell. Last quarter, the company posted a positive earnings surprise of 23.08%.
In fact, the company has posted positive earnings surprises in three out of the trailing four quarters, with the average positive earnings surprise being 90.84%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
MGM Resorts’ earnings in the to-be-reported quarter are expected to benefit from improving demand at its properties in Las Vegas, thanks to a higher employment rate and a rise in the number of tourists. With the Las Vegas Strip recording high occupancy rates over the past year, the company has seen a solid rise in resort revenues, which should boost the top line. Further, the diversification of its resort portfolio and non-gaming options should propel second-quarter revenues as well.
However, the sluggish environment in Macau is likely to keep revenues under pressure as high-stake gamblers have been reducing their spending amid the ongoing economic weakness in China. The region has also struggled due to the Chinese government’s anti-graft corruption drive, which has reduced footfall at the casinos. Also, credit growth concerns, tighter restrictions on visas and a partial smoking ban in casinos have impacted revenues in the region.
The weakening of yuan is likely to further dent Macau’s gambling revenues as it gets more expensive for Chinese gamblers to place bets. Further, a slowdown in the Chinese economy is hurting the mass market segment, which will in turn hurt revenues in the to-be reported quarter.
Nevertheless, a comparatively better performance at main floor and non-gaming segments can somewhat make up for the slowdown in the VIP gaming business in Macau.
Our proven model does not conclusively show that MGM Resorts is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Its Earnings ESP is -24.00%. This is because the Most Accurate estimate stands at 19 cents while the Zacks Consensus Estimate is pegged higher at 25 cents.
Zacks Rank: MGM Resorts’ Zacks Rank #3 increases the predictive power of ESP. However, we also need a positive ESP to be confident about an earnings surprise.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some stocks in the consumer discretionary sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Eros International Plc , with an Earnings ESP of +7.14% and a Zacks Rank #3.
Red Lion Hotels Corporation , with an Earnings ESP of +100% and a Zacks Rank #3
Time Warner Inc. , with an Earnings ESP of +0.87% and a Zacks Rank #3
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>
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MGM Resorts (MGM) Q2 Earnings: Will Macau Hurt Results?
MGM Resorts International (MGM - Free Report) is set to report second-quarter 2016 results on Aug 4, before the opening bell. Last quarter, the company posted a positive earnings surprise of 23.08%.
In fact, the company has posted positive earnings surprises in three out of the trailing four quarters, with the average positive earnings surprise being 90.84%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
MGM Resorts’ earnings in the to-be-reported quarter are expected to benefit from improving demand at its properties in Las Vegas, thanks to a higher employment rate and a rise in the number of tourists. With the Las Vegas Strip recording high occupancy rates over the past year, the company has seen a solid rise in resort revenues, which should boost the top line. Further, the diversification of its resort portfolio and non-gaming options should propel second-quarter revenues as well.
However, the sluggish environment in Macau is likely to keep revenues under pressure as high-stake gamblers have been reducing their spending amid the ongoing economic weakness in China. The region has also struggled due to the Chinese government’s anti-graft corruption drive, which has reduced footfall at the casinos. Also, credit growth concerns, tighter restrictions on visas and a partial smoking ban in casinos have impacted revenues in the region.
The weakening of yuan is likely to further dent Macau’s gambling revenues as it gets more expensive for Chinese gamblers to place bets. Further, a slowdown in the Chinese economy is hurting the mass market segment, which will in turn hurt revenues in the to-be reported quarter.
Nevertheless, a comparatively better performance at main floor and non-gaming segments can somewhat make up for the slowdown in the VIP gaming business in Macau.
MGM RESORTS INT Price and EPS Surprise
MGM RESORTS INT Price and EPS Surprise | MGM RESORTS INT Quote
Earnings Whispers
Our proven model does not conclusively show that MGM Resorts is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Its Earnings ESP is -24.00%. This is because the Most Accurate estimate stands at 19 cents while the Zacks Consensus Estimate is pegged higher at 25 cents.
Zacks Rank: MGM Resorts’ Zacks Rank #3 increases the predictive power of ESP. However, we also need a positive ESP to be confident about an earnings surprise.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some stocks in the consumer discretionary sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Eros International Plc , with an Earnings ESP of +7.14% and a Zacks Rank #3.
Red Lion Hotels Corporation , with an Earnings ESP of +100% and a Zacks Rank #3
Time Warner Inc. , with an Earnings ESP of +0.87% and a Zacks Rank #3
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>