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Gambling Stock Roundup: Macau Sales Rise; Las Vegas Sands, Wynn Resorts Q3 Earnings in Focus

LVS WYNN CNTY BYD MPEL

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Last week was quite an eventful one for the gambling industry with revenues for October rising more than anticipated in Macau. This marked the third consecutive month of growth, following an extended slump of over two years.

On the other hand, third-quarter earnings releases were in the spotlight over the last five trading days.

While Las Vegas Sands Corp. (LVS - Free Report) and Melco Crown Entertainment Ltd. (MPEL - Free Report) posted better-than-expected earnings and revenues, Wynn Resorts Ltd. (WYNN - Free Report) and Century Casinos Inc. (CNTY - Free Report) lagged on both fronts.

On the other hand, Boyd Gaming Corp.’s (BYD - Free Report) results were a mixed bag as its earnings beat the Zacks Consensus Estimate while revenues missed the consensus mark.

Gaming Industry Price Index

 

Gaming Industry Price Index

Recap of the Week’s Most Important Stories  

1.    Gross gaming revenues (GGR) for the month of October rose 8.8% on a yearly basis to approximately $2.7 billion or 21.8 billion patacas, per the Macau Gaming Inspection and Coordination Bureau. This third successive rise in October, after 26 months of decline, continued the revival in Macau.

Notably, new resorts including Wynn Resorts' Wynn Palace (opened on Aug 22) and Las Vegas Sands' subsidiary, Sands China Ltd.’s The Parisian (opened on Sep 13), continued to attract tourists and leisure gamblers, giving a boost to revenues. Moreover, the rise compared favorably with the 7.4% increase recorded in Sep 2016.

Meanwhile, GGR in Macau for the first 10 months of 2016 were down 5.8% year over year. Notably, gaming revenues in Macau have been falling since Jun 2014, given 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 mainland China to Macau.

Consequently, this lowered footfall at local casinos. A slowdown in China, tighter visa policies, political unrest and a smoking ban on mass market gaming floors compounded the woes.  

Nonetheless, efforts undertaken by Macau operators to revive revenues by adding new resorts and more non-gaming facilities in order to attract tourists and recreational gamblers have finally started yielding results. This is evident from gambling revenue growth in the past three months.

2.    Las Vegas Sands’ third-quarter earnings of 72 cents surpassed the Zacks Consensus Estimate of 59 cents by over 22%. Also, earnings increased 9% year over year due to higher revenues and profits.

Quarterly net revenue of $2.97 billion also topped the Zacks Consensus Estimate of $2.77 billion by 7.2% and inched up 2.6% year over year due to a somewhat better performance in Macao. On a consolidated basis, adjusted property EBITDA increased 8.6% year over year to $1.14 billion during the quarter owing to higher revenues.

This Zacks Rank #3 (Hold) company stated that the operating environment in Macao continued to improve during the quarter, especially in the mass segment, as the market exhibited growth in total gaming revenue, overnight visitation and length of stay (read more: Las Vegas Sands Q3 Earnings, Revenue Top; Stock Up).

3.    Wynn Resorts posted earnings of 75 cents per share in the third quarter, missing the Zacks Consensus Estimate of 79 cents by 5.1%. Further, earnings decreased 12.8% year over year mainly due to a lower operating income margin. Net revenue of $1.11 billion failed to surpass the Zacks Consensus Estimate of $1.13 billion by 1.8%. However, revenues increased 11.4% on the back of improved performance by Las Vegas Operations and the Wynn Palace opening, partly offset by lower revenues from Wynn Macau.

Despite consistent efforts to boost tourism and traffic in Macau, this Zacks Rank #3 company failed to turn around its operations in the region. Also, cannibalization at Wynn Macau given the opening of Wynn Palace hampered results (read more: Wynn Resorts Q3 Earnings, Revenues Lag; Stock Hit).

4.    Melco Crown reported third-quarter earnings per share of 13 cents, which outpaced the Zacks Consensus Estimate of 4 cents by a whopping 225%. Also, this Zacks Rank #1 (Strong Buy) company’s earnings increased 18.2% over the prior-year quarter owing to higher revenues. You can see the complete list of today’s Zacks #1 Rank stocks here.

Quarterly net revenue of $1.15 billion surpassed the Zacks Consensus Estimate of $1.13 billion by 1.8%. Moreover, the figure improved 22% on a year-over-year basis, primarily driven by contributions from Studio City, launched in Oct 2015, as well as higher casino revenues at City of Dreams Manila. These upsides were, however, partially offset by lower casino revenues at City of Dreams Macau and Altira Macau.

Adjusted Property EBITDA was $289.2 million in the third quarter, up 22% year over year (read more: Melco Crown Q3 Earnings & Revenues Beat, Up Y/Y).

5.    Meanwhile, Boyd Gaming’s third-quarter adjusted earnings of 14 cents per share surpassed the Zacks Consensus Estimate of 12 cents by 16.7% but decreased 48.1% on a year-over-year basis owing to lower revenues. Net revenue of $532 million failed to beat the consensus mark of $542 million by nearly 2% and declined 2.6% 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 $121.9 million, down 2.6% year over year. Boyd Gaming carries a Zacks Rank #2 (Buy).  

6.    Century Casinos posted third-quarter adjusted earnings per share of 8 cents, lagging the Zacks Consensus Estimate of 9 cents by 11.1% and declining 27.3% from prior-year quarter figure.

Net revenue of $34.5 million lagged the consensus mark by nearly 4% but improved 3% from the prior-year quarter. The results reflect a decrease in Canada revenues, more than offset by an increase in revenues in the U.S., Poland as well as corporate and other revenues.

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

-6.9%

-1.8%

LVS

2.1%

32.9%

MGM

0.9%

20.8%

MPEL

5.1%

19.0%

MCRI

-3.3%

18.8%

CACQ

-13.7%

24.2%

BYD

-3.1%

-7.8%

Over the last five trading sessions, share price movement of the major gambling stocks witnessed a mixed trend. Melco Crown gained the maximum of 5.1% followed by Las Vegas Sands’ rise of 2.1%. Among those that lost, Caesars Acquisition Company and Wynn Resorts recorded a decline of 13.7% and 6.9%, respectively.

However, over the last six months, the price performance of gambling stocks has been predominantly positive. Among the stocks that appreciated the most were Las Vegas Sands and Caesars Acquisition Company that gained 32.9% and 24.2%, respectively. On the contrary, Boyd Gaming recorded a decline of 7.8% over the same time frame.

What’s Next in the Gambling Space?

We note that gambling stocks have seen both gains and losses in the recent sessions and with the earnings season in its last leg, investors can expect this volatility to continue.

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