Wynn Resorts Ltd. (WYNN) is set to report third-quarter 2014 results this month. Last quarter, the company posted a positive earnings surprise of 1.44%. Let us see what is in store for this stock this quarter.
Factors to Consider
Though Wynn Resorts earnings have been comfortably beating the Zacks Consensus Estimate over the past few quarters, we expect the upcoming quarter to be a tough one.
Wynn Resorts earns a major part of its revenue from Macau. Gross gaming revenues at Macau have been declining consistently for the past four quarters owing to the anti-graft corruption drive. This has raised a concern for the upcoming quarter.
China's crackdown on illegal money transfers, credit growth concerns, tighter restrictions on visas, smoking ban in casinos and the current protests in Hong Kong are adversely impacting the revenues of the companies operating in the region. In fact, the company’s growth in Macau in the second quarter was not as strong as it had been in the past few quarters. In fact, it was lower than the growth rate in the Las Vegas region, reflecting an overall slowdown in Macau gambling market.
Earnings Whispers?
Our proven model does not conclusively show that Wynn Resorts is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: The company’s Earnings ESP stands at -1.11%. This is because the Most Accurate estimate is pegged at $1.78 while the Zacks Consensus Estimate stands higher at $1.81.
Zacks Rank: Wynn Resorts has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Over the last 30 days, estimates have largely declined for the upcoming quarter as well as for 2014.
Stocks to Consider
Here are some other companies in the gaming and 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:
Pinnacle Entertainment Inc. (PNK) with an Earnings ESP of +9.09% and a Zacks Rank #3 (Hold).
Care.com, Inc. (CRCM) with an Earnings ESP of +2.44% and a Zacks Rank #1 (Strong Buy).
The Walt Disney Company (DIS) with an Earnings ESP of +3.41% and a Zacks Rank #2 (Buy).
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