Melco Resorts & Entertainment Limited (NASDAQ:MLCO) last week reported its latest third-quarter results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Results look to have been somewhat negative - revenue fell 6.9% short of analyst estimates at US$213m, although statutory losses were somewhat better. The per-share loss was US$0.69, 47% smaller than the analysts were expecting prior to the result. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Following the latest results, Melco Resorts & Entertainment's 16 analysts are now forecasting revenues of US$4.79b in 2021. This would be a sizeable 81% improvement in sales compared to the last 12 months. Melco Resorts & Entertainment is also expected to turn profitable, with statutory earnings of US$0.33 per share. In the lead-up to this report, the analysts had been modelling revenues of US$4.79b and earnings per share (EPS) of US$0.28 in 2021. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the substantial gain in earnings per share expectations following these results.
The consensus price target was unchanged at US$21.21, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Melco Resorts & Entertainment analyst has a price target of US$30.00 per share, while the most pessimistic values it at US$10.40. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting Melco Resorts & Entertainment's growth to accelerate, with the forecast 81% growth ranking favourably alongside historical growth of 2.2% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 22% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Melco Resorts & Entertainment is expected to grow much faster than its industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Melco Resorts & Entertainment following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at US$21.21, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Melco Resorts & Entertainment. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Melco Resorts & Entertainment going out to 2024, and you can see them free on our platform here..
You should always think about risks though. Case in point, we've spotted 2 warning signs for Melco Resorts & Entertainment you should be aware of, and 1 of them is a bit concerning.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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