Wynn Resorts Ltd. (WYNN) is set to report fourth-quarter and full year 2014 results on Feb 3, 2015 after the markets close. Last quarter, the company posted a positive earnings surprise of 7.14%. Let us see what is in store for this stock this quarter.
Factors to Consider
Wynn Resorts earns a major part of its revenues from Macau, the only destination in China where gambling is legal. However, the region has struggled of late owing to the anti-graft corruption drive, which has lowered footfall at the casinos.
Consequently, gross gaming revenues from the region have declined as well thereby raising concerns for the company. Notably, Macau gross gaming revenues in the three months of the fourth quarter have declined in double digits.
China's crackdown on illegal money transfers, credit growth concerns, tighter restrictions on visas, smoking ban in casinos and the protests in Hong Kong have been adversely impacting the revenues of the companies operating in the Macau region. In fact, Wynn Resorts’ revenue growth in Macau in the second and third quarter was not as strong as it had been in the earlier few quarters. Given the current scenario, we believe that the fourth quarter may prove to be a tough one for the company.
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 -7.64%. This is because the Most Accurate estimate is pegged at $1.33 while the Zacks Consensus Estimate stands higher at $1.44.
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 for the fourth quarter and 2014 have largely declined.
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 +3.45% and a Zacks Rank #2 (Buy).
Boyd Gaming Corp. (BYD) with an Earnings ESP of +16.67% and a Zacks Rank #2.
Choice Hotels International Inc. (CHH) with an Earnings ESP of +2.70% and a Zacks Rank #1 (Strong Buy).
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