Last week was quite eventful for the gambling industry as Macau's gaming revenues rose for the 15th consecutive month in October. This indicates that the casino hub is firmly on its path to recovery from the two-year slump stemming from China's anti-graft corruption drive and slow economic growth.
Additionally, the Nevada Gaming Control Board announced an increase in revenues in the region in September.
On the one hand, Melco Resorts & Entertainment Limited MLCO came up with better-than-expected third-quarter 2017 results. On the other hand, Eldorado Resorts, Inc. ERI posted mixed results, wherein earnings compared favorably with the Zacks Consensus Estimate but revenues missed the same.
Recap of the Week’s Most Important Stories
1. Per the Macau Gaming Inspection and Coordination Bureau, gross gaming revenues for October increased 22.1% on a yearly basis to roughly $3.3 billion or 26.6 billion patacas (the highest revenue figure since 2014) with robust demand gaining an added boost from a national holiday week. In fact, the improvement was above a 16.1% increase recorded in September 2017.
Markedly, a tough operating environment in Macau has been weighing on casino stocks since June 2014 to the most part of 2016. The crackdown on corruption in China 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.
However, Macau's gambling revenues have been rising since the second half of 2016, with new resorts attracting high rollers and leisure gamblers.
Also, efforts undertaken by Macau operators to revive revenues by wooing tourists and recreational gamblers with family-friendly resorts and more non-gaming facilities have started yielding results. This is evident from revenue growth in the past 15 months.
Thus, it seems that the worst is over for Macau’s gambling industry and a complete rebound in the region may be in the cards.
2. According to the Nevada Gaming Control Board, gambling revenues in the state increased nearly 3.3% in September 2017 from the year-ago period to $979.9 million. Particularly, casino revenues in the Las Vegas Strip — which account for more than half of Nevada’s total revenues — were up 4.7% year over year in the month. Reno recorded a 9.2% rise in casino revenues as well. In fact, revenues in the region have been mostly strong over the past few months.
3. Melco Resorts’ third-quarter earnings of 31 cents per share surpassed the Zacks Consensus Estimate of 23 cents by 34.8% Also, the bottom line increased significantly from the prior-year quarter’s figure of 13 cents, owing to higher revenues.
Notably, this Zacks Rank #3 (Hold) company’s net revenues of $1.38 billion surpassed the Zacks Consensus Estimate of $1.29 billion by nearly 4% and also increased 19.5% on a year-over-year basis. This improvement in the top line was primarily driven by higher rolling chip revenues at City of Dreams and the initiation of rolling chip operations at Studio City in November 2016. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Adjusted Property EBITDA (earnings before interest, taxes, and amortization) was $400.2 million in the quarter under review, up 38.4% year over year. The upside was prompted by improved performance in the group-wide rolling chip segment (read more: Melco Resorts’ Stock Falls Despite Q3 Earnings Beat.
4. Eldorado Resorts posted third-quarter 2017 earnings of 36 cents, which topped the Zacks Consensus Estimate of 32 cents by 12.5%. However, net revenues of $444.9 million decreased 1% year over year and lagged the consensus estimate by over 1%. The year-over-year decline in this Zacks Rank #3 company’s results reflects the decline in revenues at the Midwest, the South and the East segments, partially offset by a rise in the West segment.
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 |
6.3% |
24.9% |
|
LVS |
7.2% |
15.1% |
|
MGM |
2.3% |
2.8% |
|
MLCO |
9.6% |
20.8% |
|
MCRI |
3.9% |
51.7% |
|
PENN |
2.4% |
39.9% |
|
BYD |
2% |
19.4% |
Over the last five trading sessions, share price movement of the major gambling stocks was positive. Melco Resorts gained the maximum at 9.6% followed by Las Vegas Sands Corp.’s LVS rise of 7.2%. Additionally, ,Wynn Resorts Ltd. WYNN and Monarch Casino & Resort, Inc. MCRI recorded a gain of 6.3% and 3.9%, respectively.
Over the last six months, the price performance of gambling stocks was impressive too. Among the stocks that appreciated the most were Monarch Casino and Pann National Gaming, Inc. PENN that rallied 51.7% and 39.9%, respectively. Wynn Resorts also recorded a gain of 24.9% over the same time frame.
What’s Next in the Gambling Space?
We note that gambling stocks have witnessed gains in recent sessions on the back of continual rebound in Macau gaming revenues. Also, majority of the casino operators were able to capitalize on the same and posted largely impressive results, which further propelled the stocks. Such encouraging results may continue to drive the stocks in the near term as well.
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