Last week, share price of Las Vegas Sands Corp. (LVS) declined after the company’s second quarter results fell short of the Zacks Consensus Estimate. In one other development, Penn National Gaming Inc. (PENN) and The Cordish Companies entered into an agreement with Hudson Valley Building and Construction Trades Council and the Hotel and Motel Trades Council for the construction and operation of Live! Hotel & Casino New York.
Further, Live Nation, a live events company, announced that it will hold a music event at MGM Resorts International’s (MGM) Luxor Hotel & Casino located in Las Vegas. Meanwhile, Atlantic City, East Coast's gambling hub, faces a threat as many casino operators are withdrawing themselves from the region. (Read last to last week’s developments: Gambling Stock Round up for Jul 14, 2014).
Recap of the Week’s Important Stories:
1. Las Vegas Sands posted lower-than-expected second quarter 2014 results with both earnings and revenue missing the Zacks Consensus Estimate. Adjusted earnings of 85 cents per share missed the Zacks Consensus Estimate by 4.5%, possibly due to a sluggish Macau market. However, it increased 30.8% year over year driven by an increase in revenues and margins.
Quarterly net revenue of $3.62 billion missed the Zacks Consensus Estimate of $3.81 billion by 5.0% due to a slowdown in gambling in Macau. However, revenues increased 11.7% year over year to $3.62 billion. (Read More: Las Vegas Sands Lags Q2 Earnings on Sluggish Macau Growth)
2. Penn National Gaming and The Cordish Companies entered into an agreement with Hudson Valley Building and Construction Trades Council and the Hotel and Motel Trades Council for the construction and operation of Live! Hotel & Casino New York. Penn National Gaming and The Cordish Companies are joint venture owners of this project. They had recently announced establishment of five marquee dining restaurants at Live! Hotel & Casino New York.
3. Atlantic City that was once East Coast's gambling hub is facing stiff competition after gambling was legalized in neighboring states including Pennsylvania and New York. Hence, several casino operators are withdrawing themselves from the market. The Atlantic Club was closed in January. Meanwhile, Trump Entertainment Resorts Inc. plans to close one of its two Atlantic City casinos in Sep 2014.
Caesars Entertainment Corp. (CZR) plans to shut Showboat on Aug 31. Revel, the $2.4 billion entertainment resort, hotel, casino and spa is also searching for a buyer. The closure of the casinos will leave 6,000 to 8,000 people unemployed.
4. Live Nation, a live events American entertainment company, revealed that it will organize a music festival Route 91 Harvest at Luxor Hotel & Casino in Las Vegas. Located at the Las Vegas Strip in Paradise, Luxor Hotel & Casino is owned and operated by MGM Resorts. The music event is scheduled to be held from Oct 3 to Oct 5. Besides, boosting visitation at the hotel, it would also improve traffic at other Las Vegas-based casinos and hotels.
The past two weeks have been unfavorable for most of the casino operators. Post the announcement that Macau faces threats from China's slowing economy, share prices of leading casino operators who earn who earn a better part of their revenues from Macau continued to decline. Las Vegas Sands declined the most (2.4%) followed by Melco Crown Entertainment Ltd. (MPEL), Wynn Resorts Ltd. (WYNN) and MGM Resorts.
In fact, the decline at Las Vegas Sands is also the outcome of the disappointing second quarter results. Also, a number of analysts have lowered their 2014 and 2015 margin and earnings estimates for Las Vegas Sands. However, they are optimistic about the company over the long-term.
We believe that despite the sluggish scenario, the price decline was insignificant. Given the decline in share prices, reportedly investors bought more gaming stocks, which led to small gains, thereby offsetting the effect of the decline to some extent.
Caesars Entertainment was an exception and gained 3.2% over the one-week period.
Over the last six months, Boyd Gaming Corp. (BYD) has been the only gainer with 4.4% increase. However, all other stocks declined over the same time frame with Melco Crown and Caesars Entertainment declining the most – 25.7% and 25.1%, respectively.
Last 6 months
What’s Next in the Gambling World?
Penn National Gaming with an Earnings ESP of 14.3% and a Zacks Rank #3 (Hold) is set to release its second quarter 2014 results on Jul 24, 2014. Pinnacle Entertainment Inc. with an Earnings ESP of 8.3% and a Zacks Rank #2 (Buy) will also report second quarter results on the same day.
We note that gambling stocks have oscillated between gains and losses in recent sessions and investors can expect such movement in the coming days as well. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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- Penn National Gaming Inc.
- Las Vegas
- Las Vegas Sands
- Atlantic City
- Live Nation