Wynn Resorts Ltd. WYNN is set to report third quarter 2015 results on Oct 15, after the markets close. Last quarter, the company posted a negative earnings surprise of 23.71%. In, fact, the company has a negative four-quarter average earnings surprise of 23.71%. Let's see what is in store this quarter.
Factors to Consider
Wynn Resorts’ earnings and revenues have been missing the Zacks Consensus Estimate consistently over the past three quarters owing to a sluggish environment in Macau, a key operating region for Wynn Resorts. In fact, revenues in Macau have plunged in double digits in all three months of the quarter due to the anti-graft corruption drive taken by the Chinese government. As a result, the VIP business in Macau has been affected considerably.
China's crackdown on illegal money transfers, credit growth issues, and tighter restrictions on visas have posed considerable threats to Macau’s gaming revenues, which have raised concerns for companies like Wynn Resorts. In fact, the latest decline for the month of September marked the 16th consecutive decline. Given the current scenario, the soon-to-be reported quarter is expected to be a tough one for the company.
We note that Chinese visitors account for more than 60% of Macau’s traffic. Therefore, the weakening of yuan is likely to further contract Macau’s gambling revenues as it is making it more expensive for Chinese gamblers to place their bets.
Earnings Whispers?
Our proven model does not conclusively show that Wynn 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, 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 -4.00%. This is because the Most Accurate estimate is pegged at 72 cents while the Zacks Consensus Estimate stands higher at 75 cents.
Zacks Rank: Wynn Resorts has a Zacks Rank #5 (Strong 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.
Estimates for both the third quarter and 2015 have declined over the past 30 days.
Stocks to Consider
Here are some companies in the gaming industry and 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:
Churchill Downs Inc. CHDN with an Earnings ESP of +1.70% and a Zacks Rank #2 (Buy).
Norwegian Cruise Line Holdings Ltd. NCLH with an Earnings ESP of +1.48% and a Zacks Rank #1 (Strong Buy).
Royal Caribbean Cruises Ltd. RCL with an Earnings ESP of +0.37% and a Zacks Rank #2.
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