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Will MGM Resorts (MGM) Surprise Q2 Earnings Estimates? - Analyst Blog

MGM Resorts International MGM is slated to report second-quarter 2015 results on Aug 4, before the opening bell. The company posted a positive earnings surprise of 85.71% in the last reported quarter. It has missed the Zacks Consensus Estimate in two of the trailing four quarters and has an average negative surprise of 13.99%. Let’s see how things are shaping up for this announcement.

Factors Influencing this Quarter

Revenues in Macau, a key operating region for MGM Resorts 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 concerns, tighter restrictions on visas have posed considerable threats to Macau’s gaming revenues, which have raised concerns for companies like MGM Resorts. In fact, the latest decline for the month of June marked the 13th consecutive month of decline. Given the current scenario, the soon-to-be reported quarter is expected to be a tough one for the company.

Nevertheless, a comparatively better performance at main floor and non-gaming would mitigate the effects of a slowdown in the VIP gaming business in Macau to some extent. Also, the company’s properties at Las Vegas would leverage the benefits of an improving employment rate and other positive factors related to tourism in Las Vegas.

Earnings Whispers

Our proven model shows that MGM Resorts is not likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: MGM Resorts’ Earnings ESP is -27.27%. This is because the Most Accurate Estimate of 8 cents is lower than the Zacks Consensus Estimate of 11 cents.

Zacks Rank: MGM Resorts’ Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies in 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:

Guess' Inc. GES has an earnings ESP of +6.67% and a Zacks Rank #1.

Norwegian Cruise Line Holdings Ltd. NCLH has an earnings ESP of +1.35% and a Zacks Rank #2.

SeaWorld Entertainment, Inc. SEAS with an earnings ESP of +10% has a Zacks Rank #2.

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 >>


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
 
MGM RESORTS INT (MGM): Free Stock Analysis Report
 
GUESS INC (GES): Free Stock Analysis Report
 
NORWEGIAN CRUIS (NCLH): Free Stock Analysis Report
 
SEAWORLD ENTERT (SEAS): Free Stock Analysis Report
 
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