Quarterly results remained in focus last week. Wynn Resorts Ltd. WYNN posted dismal second quarter 2015 results with earnings and revenues missing the Zacks Consensus Estimate. This marked the third consecutive miss. Pinnacle Entertainment Inc. PNK beat the consensus mark on both counts. Churchill Downs Inc. CHDN missed on earnings but beat on revenues, thereby posting mixed quarterly results.
Not surprisingly, monthly gross gaming revenues (GGR) from Macau once again experienced a decline – marking the fourteenth consecutive monthly decline and the eleventh consecutive double-digit decline.
In other developments, Penn National Gaming Inc. PENN continued to expand its portfolio with an agreement to acquire Prairie State Gaming operations while Caesars Entertainment Corp. CZR took a step closer to its bankruptcy plan by entering into Restructuring Support Agreement (RSA) with First Lien Note holders. (Read earlier development: Gambling Stock Round Up for Jul 27, 2015).
Recap of the Week’s Important Stories:
1. Wynn Resorts posted dismal second quarter 2015 results with second quarter adjusted earnings of 74 cents plunging 65% year over year and missing the Zacks Consensus Estimate of 97 cents by 23.7%. The downside reflects a significant decline in revenues. Not surprisingly, this Las Vegas, NV-based casino operator’s revenues of $1.04 billion also missed the consensus mark of $1.07 billion by 2.5%. Revenues fell 26.3% year over year, owing to a sluggish performance in Macau as well as weak performance in Las Vegas. (Read: Macau Takes a Toll on Wynn Resorts' Earnings & Revenues)
Another Nevada based company, Pinnacle Entertainment, posted strong second quarter 2015 results with adjusted earnings of 41 cents per share beating the Zacks Consensus Estimate of 39 cents by 5%. Also, earnings increased 10.8% year over year on higher revenues and improved margins. Net revenue of $582.0 million beat the consensus mark of $569.0 million by 2.2% and went up 4.8% year over year driven by strong performances at the company’s properties at Kansas City, St. Charles, River City, and Belterra Resort, Baton Rouge and Vicksburg and Black Hawk.
Revenues at gaming, food and beverage and retail, entertainment and other revenues all increased on a year-over-year basis. Revenues at its Midwest as well as West segments increased year over year. However, revenues at the South segment declined. Adjusted EBITDA margin was 26.5%, up 120 basis points year over year.
2. Churchill Downs posted second quarter results with earnings per share of $3.10 cents missing the Zacks Consensus Estimate of $3.42 by 9.4% and falling 3.4% year over year. The downside reflects an increase in operating expenses and interest expenses. Net revenue of $409.2 million beat the Zacks Consensus Estimate of $403.0 million by 1.5% and increased approximately 35% year over year.
The upside reflects additional revenues from Big Fish Games, which the company acquired in Dec 2014. Except for the Racing segment, all other segments’ revenues including Casinos and TwinSpires grew year over year.
3. In one other development, Macau gross gaming revenues for the month of July fell 34.5% to 18.6 billion patacas or $2.33 billion, per the Macau Gaming Inspection and Coordination Bureau. The decline was almost in-line with analysts’ expectations. However, this marked the 14th consecutive monthly decline. The slowdown was due to a nationwide crackdown on corruption in China that compelled Macau officials to impose strict restrictions on VIP gamblers. With the recent decline, aggregate gaming revenue was down 36.7% year over year for the first seven months of the year.
4. Penn National Gaming entered into a definitive agreement to acquire Illinois video gaming terminal (VGT) operator Prairie State Gaming (PSG) in an all cash transaction. PSG’s operations are one of the largest VGT route operators in Illinois that include more than 1,100 terminals across a network of 270 bar and retail gaming establishments throughout the State. Subject to regulatory and other customary approvals and conditions, the transaction is expected to close later this quarter. However, it will be accretive to the company immediately.
5. In one other development, Caesars Entertainment and its subsidiary Caesars Entertainment Operating Company, Inc. (CEOC) entered into a Restructuring Support Agreement (RSA) with First Lien Note holders. The agreement reaffirms and reflects the support of CEOC's largest creditor constituency. The recently announced Second Lien Note holder debt restructuring agreement coupled with the current agreement provides a platform for consent restructuring.
Besides a revised set of case milestones, several significant enhancements to the transaction for the benefit of all creditors, including the First Lien Noteholders, First Lien Bank Lenders and Non-First Lien Noteholders were agreed per RSA.
Share Price Performance
The last week proved to be quite positive in terms of share price with the highest increase of 10.9% at MGM Resorts International MGM followed by a 5.9% increase at Caesars Entertainment. Meanwhile, Caesars Acquisition Company CACQ showed no movement in terms of share price over the last 5 trading days.
Over the last six months, share price of most of the gambling stocks lost value with Caesars Entertainment experiencing the highest decline of 52.1%, followed by Wynn Resorts that declined approximately 29.2%. However, Boyd Gaming Corporation gained over the same time frame.
|
Company |
Last Week |
Last 6 months |
|
WYNN |
4% |
-29.2% |
|
LVS |
4.6% |
5.6% |
|
MGM |
10.9% |
0.7% |
|
MPEL |
3.7% |
-13.7% |
|
CACQ |
0.00% |
-16.9% |
|
BYD |
3.7% |
30.9% |
|
CZR |
5.9% |
-52.1% |
What’s Next in the Gambling World?
We note that gambling stocks have oscillated between gains and losses in recent sessions and investors can expect this volatile movement to continue with some more companies releasing their earnings in the coming weeks.
MGM Resorts expected to report second quarter results on Aug 4 carries a Zacks Rank #3 (Hold) and has an Earnings ESP of -27.27%. Melco Crown Entertainment Limited that is scheduled to report second quarter results on Aug 6 carries a Zacks Rank #3 and an Earnings ESP of -44.44%.
Caesars Entertainment with a Zacks Rank #3 and an Earnings ESP of 0.00% is expected to report its second quarter results on Aug 4. Century Casinos Inc. is expected to report second quarter results on Aug 7. It has a Zacks Rank #3 and an Earnings ESP of 0.00%.
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