Earnings releases took center stage last week, along with some other developments in the gambling industry. Quarterly results for both Churchill Downs Inc. CHDN and Pinnacle Entertainment Inc. PNK came in lower than expected on both top and bottom lines. Meanwhile, despite "Golden Week" falling in the month of October, Macau gambling revenues fell for the 17th consecutive month.
However, MGM Resorts International MGM posted mixed third quarter 2015 results with earnings beating the Zacks Consensus Estimate for the third consecutive quarter while revenues missed. Performance in Las Vegas and regional resorts improved. However, MGM China continued to remain sluggish due to weakness in Macau, a key operating region of the company.
Meanwhile, the company announced a plan to create a real estate investment trust (REIT). In one other development, the much-awaited Melco Crown Entertainment Limited’s MPEL Studio City, Macau was opened last week. (Read earlier development: Gambling Stock Round Up for Oct 26, 2015)
Recap of the Week’s Important Stories:
1. MGM Resorts posted mixed third quarter 2015 results with earnings of 15 cents (excluding pre-opening and start-up expenses) beating the Zacks Consensus Estimate of 3 cents. It also compared favorably with the year-ago loss of 2 cents. Lower revenues were partially offset by a decline in expenses. Including pre-opening and start-up expenses, earnings came in at 12 cents.
Total revenue of $2.28 billion missed the Zacks Consensus Estimate of $2.29 billion by 0.6%. Also, it declined 8.2% year over year. The downside reflects a significant decline in revenues from MGM China. The company owns 51% of MGM China Holdings Limited, which owns the MGM Macau resort and casino and is developing a gaming resort in Cotai.
In one other development, MGM Resorts announced a plan to create a controlled real estate investment trust that will be named MGM Growth Properties LLC (MGP). The REIT will include real estate associated with 10 of MGM Resorts’ premier properties and will assume about $4 billion in debt. Subject to market conditions and required regulatory approvals, the transaction is expected to be completed in the first quarter of 2016. (Read: MGM Resorts Up on Q3 Earnings Beat, Announces REIT Plan)
2. Churchill Downs posted lower-than-expected third quarter results with earnings per share of 40 cents missing the Zacks Consensus Estimate of 59 cents by 32%. However, it increased 100% year over year owing to an increase in revenues. Net revenue of $279.8 million marginally missed the consensus mark. However, it increased approximately 61% year over year.
The upside reflects additional revenues from Big Fish Games, which the company acquired in Dec 2014. Growth in revenues from Casinos and TwinSpires was partially offset by a decline in Racing revenues.
3. Like Churchill Downs, Pinnacle Entertainment also posted lower-than-expected third quarter 2015 results with adjusted earnings of 36 cents per share missing the Zacks Consensus Estimate of 43 cents by 16%. However, earnings increased 80% year over year on higher revenues. Net revenue of $578.6 million grew 1.8% year over year driven by revenue growth at Midwest and West Segment, partially offset by a decline at South Segment.
Revenues marginally missed the consensus mark of $580.0 million. Revenues at gaming, food and beverage and lodging grew year over year while retail, entertainment and other revenues declined. Consolidated adjusted EBITDA margin was 25.9%, up 100 basis points year over year.
4. Gross gaming revenues in Macau plunged 28.4% to 20.1 billion patacas or $2.51 billion for the month of October per Gaming Inspection and Coordination Bureau. The decline came almost in line with analysts’ expectations. The current decline marks the 17th consecutive monthly decline and the fourteenth consecutive double-digit decline. The anti-graft corruption campaign continued to keep gamblers at bay, hence hurting revenues. In fact, though gross gaming revenue during the Golden Week in October was reportedly 65% higher than the daily takings in September, it was still 25% lower than the last year over the same-period.
5. Melco Crown’s Studio City – a cinematically-themed leisure destination resort – worth $3.2 billion was opened last week. Studio City has been developed by Studio City International Holdings Limited and Melco Crown has 60% interest in the same. The resort has been designed to be the most diversified entertainment resort offering in Macau with a number of international-brand entertainment amenities under one roof.
Share Price Performance
The last five trading days were quite positive in terms of share price movement as most of the companies ended in green. MGM Resorts experienced the highest increase of 6.9% followed by Wynn Resorts Ltd. WYNN that rose 5.3%.
Over the last six months, share price movement was quite mixed. Wynn Resorts experienced the highest decline of 36.4%, followed by Caesars Entertainment Corp. CZR that witnessed a decline of 15.2%. Meanwhile, shares of Boyd Gaming Corp. BYD went up 51.4% and Caesars Acquisition Company gained 16.6% over the same time frame.
|
Company |
Last Week |
Last 6 months |
|
WYNN |
5.3% |
-36.4% |
|
LVS |
1.4% |
-3.9% |
|
MGM |
6.9% |
9.7% |
|
MPEL |
5.1% |
-8.1% |
|
CACQ |
3.2% |
16.6% |
|
BYD |
3.2% |
51.4% |
|
CZR |
1.0% |
-15.2% |
What’s Next in the Gambling World?
We note that gambling stocks have oscillated between gains and losses in recent sessions and with the earnings season in full swing, investors can expect this volatile movement to continue in the coming days as well.
Melco Crown that currently has a Zacks Rank #3 (Hold) and an Earnings ESP of +10.00% is scheduled to report its earnings on Nov 5. Meanwhile, Century Casinos Inc. that carries a Zacks Rank #2 (Buy) and an Earnings ESP of 0.00% is expected to report results on Nov 6, 2015.
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