For Immediate Release
Chicago, IL – June 3, 2021 – Zacks Equity Research Shares of The Andersons, Inc. ANDE as the Bull of the Day, InterContinental Hotels Group PLC IHG as the Bear of the Day. In addition, Zacks Equity Research provides analysis on MGM Resorts International MGM, Wynn Resorts, Ltd. WYNN and Las Vegas Sands Corp. LVS.
Here is a synopsis of all five stocks:
Bull of the Day:
The Andersons is experiencing the best agriculture market conditions since 2014. This Zacks Rank #1 (Strong Buy) is expected to grow revenue by 22% in 2021.
The Andersons is an agriculture company headquartered in Ohio that conducts business in several segments including commodity trading, ethanol, plant nutrient and rail.
Huge Beat in the First Quarter 2021
On May 4, The Andersons reported its first quarter results and crushed the Zacks Consensus by $0.52. Earnings were $0.46 compared to the Zacks Consensus of a loss of $0.06.
That's an incredible 866% beat.
The company said it was their best first quarter performance since 2014, which was the last time I wrote about it as a Bull of the Day.
Ethanol margins have improved "significantly" with ethanol prices reaching levels not seen in over 6 years.
Plant Nutrient, which is the fertilizer segment, had the best first quarter since 2008 with an 18% increase in tons sold and strong margins.
Even Rail got into the game, with its best results since the fourth quarter of 2018.
High scrap steel prices allowed The Andersons to scrap older railcars where it made economic sense and, with credit recoveries, led to the improvement in the Leasing business.
Analysts Are Bullish on 2021 and 2022
The Andersons is calling this agriculture market a "demand-driven" agriculture rally.
It sees the strong demand continuing through the peak planting season.
2 estimates have been raised in 2021 in the last 2 months, pushing the 2021 Zacks Consensus Estimate up to $1.58 from $1.31.
That is earnings growth of 1,655% as the company only made $0.09 last year.
2022 is also looking hot with another 18.4% earnings growth expected.
2 estimates were raised for 2022 in the last 60 days, pushing the 2022 Zacks Consensus Estimate up to $1.87 from $1.63 during that time.
Shares at 2-Year Highs
The agriculture companies are cyclical and this cycle is in the early innings.
Shares have been on the move higher, adding 30% year-to-date to 2-year highs.
But they still haven't broken out to new all-time highs.
The last "peak" in the shares was in 2014, which was the "peak" of the business in that cycle.
Because the "E" of the P/E has been rising, the company trades with a forward P/E of just 20.2.
It's also shareholder friendly. It pays a dividend, currently yielding 2.2%.
While many agriculture businesses have strong earnings outlooks for 2021, they don't have the stellar Zacks Rank of Strong Buy as The Andersons.
Bear of the Day:
IHG Hotels & Resorts is looking forward to the recovery in travel in 2021. This Zacks Rank #5 (Strong Sell) is expected to see a triple digit earnings rebound this year.
IHG Hotels & Resorts operates 16 hotel brands and one of the world's largest hotel loyalty programs. Headquartered in Great Britain, it has nearly 6,000 hotels in 100 countries including brands such as Six Senses Hotels Resorts Spas, Kimpton Hotels, Hotel Indigo and Holiday Inn Hotels & Resorts.
It continues to expand, even during the global pandemic, and looks to open another 1,800 hotels over the next 5 years.
Why Is It a Strong Sell?
If travel is gaining momentum in 2021, and earnings are expected to rebound in both 2021 and 2022, why is IHG a Strong Sell?
The pandemic is still hitting the company's business in several markets.
The first quarter was led by the Americas and Greater China, but China's RevPAR was down 37.7% compared with 2019.
China occupancy was 40% in the quarter, which was below the 57% rate of both Q3 and Q4 of 2020 due to temporary COVID restrictions put on in January and February.
By March, occupancy was rebounding and the demand returned towards second half of 2020 levels.
The result was that the analysts were a little too optimistic about earnings growth for 2021.
Analysts Cut 2021 and 2022 Earnings Estimates
2 estimates were cut for 2021 in the last 2 months, pushing the Zacks Consensus Estimate down to $0.99 from $1.07.
That's still earnings growth of 219% as IHG Hotels only made $0.31 last year.
Similarly, 2 estimates were also cut for 2022 in the last 2 months as well. That has pushed the Zacks Consensus down to $2.37 from $2.59.
That's another 139% earnings growth.
Is the Hotel Stock Rally Over?
The hotel stocks rallied big off their 2020 lows once the Pfizer vaccine started rolling out.
But in 2021, IHG's shares are up just 9% year-to-date. That's underperforming the S&P 500, which has gained 11.9% this year.
And because earnings are still under their pre-pandemic highs, it's trading with a forward P/E of 72.
Shares are not cheap.
If you're interested in the hotel stocks, you might want to wait to get them cheaper and with a better Zacks Rank.
No hotel company is a Zacks Rank #1 (Strong Buy) or #2 (Buy) stock.
Macau Casino Hopes Brighten: Gaming Revenues Soar in May
The worst seems to be over for casino operators in Macau, which is the world’s largest gambling hub. Macau Gross Gaming Revenues (GGR) increased in May for the fourth consecutive month. However, revenues surpassed the street estimates for the first time in the last four months.
Gaming revenues from Macau have jumped 492.2% in the month. The metric increased to 10.44 billion patacas ($1.3 billion) from 1.76 billion patacas a year ago. In February, March and April, GGR from the region increased 135.6%, 58% and 1,014.4%, respectively. Gaming revenues in May benefited from an increase in visitation from mainland China. Easing of coronavirus-related restrictions and the Golden Week holiday drove visitation.
Per the Macau Government Tourism Office, nearly 167,000 people visited Macau during the Golden Week holidays from May 1 to May 5. Average daily visitation during the five-day holiday jumped 158% in comparison with the Spring Festival in February and also rose 25% from the previous month. However, the figure is well below the pre-pandemic levels.
Increase in gaming revenues from Macau is likely to drive companies, including MGM Resorts, Wynn Resorts and Las Vegas Sands, which generate the majority of their revenues from the region.
So far this year, the Zacks Gaming industry has increased 20.3% compared with the S&P 500’s growth of 13.2%.
What’s Next for the Industry?
Although visitation is likely to improve gradually in the coming months, it is expected to take time to reach the pre-pandemic levels. However, with an increased focus on streamlining cost structures along with optimization of business processes, the industry on a whole has shown some resilience.
Casino visitations in 2020 declined sharply due to lockdowns and other coronavirus-related restrictions. This gave an opportunity to casino operators to focus on online betting.
Although the majority of the casinos have reopened with safety protocols, gaming revenues are below the pre-pandemic levels. In such a scenario, companies are focusing more on iGaming business operations to generate online gambling revenues.
Per ResearchAndMarkets, the global online gambling market is likely to reach $97.69 billion, at a CAGR (2020-2025) of 11.31%. Growth in the gambling market is likely to be driven by an increase in smartphone adoption and improving internet infrastructure globally.
Per a Nielsen report, in first-quarter 2021, the online gambling industry, mainly sports betting, spent $154 million on local TV advertisements, up $10.7 million from the start of 2019. The spending is likely to increase as more states will allow online betting in the coming months.
Some of the popular iGaming applications include DraftKings, Barstool, FanDuel, BetMGM, BetRivers, Fox Bet and BetMonarch. Markedly, the applications have been an important medium for gamers to connect, learn and inspire amid the stay-at-home restrictions.
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The Andersons, Inc. (ANDE) : Free Stock Analysis Report
Intercontinental Hotels Group (IHG) : Free Stock Analysis Report
Las Vegas Sands Corp. (LVS) : Free Stock Analysis Report
MGM Resorts International (MGM) : Free Stock Analysis Report
Wynn Resorts, Limited (WYNN) : Free Stock Analysis Report
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