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Gambling Stock Roundup: Macau Sales Rise Again in February, Nevada Thrives in January

Zacks Equity Research

The last week was quite an eventful one for the gambling industry with Macau's gaming revenues rising for the seventh consecutive month and hitting a two-year high in February. This signals that the casino hub is firmly on its path to recovery from the slump triggered by China's anti-graft corruption drive and slow economic growth.

Meanwhile, the Nevada Gaming Control Board too announced an increase in revenues in the region in January.

In a separate development, Churchill Downs Inc. CHDN posted mixed fourth-quarter 2016 results. Though earnings surpassed the Zacks Consensus Estimate, revenues missed the same.

Gaming Industry 5YR % Return

 

Gaming Industry 5YR % Return

Recap of the Week’s Most Important Stories  

1.    Per the Macau Gaming Inspection and Coordination Bureau, gross gaming revenues for February rose 17.8% on a yearly basis to roughly $2.9 billion or 23 billion patacas.

The mere 3.1% rise in gambling revenues in January had raised concerns indicating that the recovery might not be that smooth for Macau. However, the strong revival in February has somewhat eased the fears. New resorts continue to attract tourists and leisure gamblers, giving a boost to revenues.

Notably, a tough operating environment in Macau weighed on the stock in 2015 and for the most part of 2016. The crackdown on corruption in China compelled Macau officials to impose restrictions on high rollers to stop billions of dollars from being siphoned off illegally from mainland China to Macau.

Consequently, this lowered footfall at local casinos. A slowdown in China, tighter visa policies, political unrest and a smoking ban on mass market gaming floors compounded the woes. In fact, the anti-graft corruption drive undertaken by the Chinese government is still keeping VIP gamblers somewhat at bay.

Nonetheless, efforts undertaken by Macau operators to revive revenues by wooing tourists and recreational gamblers with family-friendly resorts and more non-gaming facilities have started yielding results as evident from gambling revenue growth in the past seven months. Thus, it seems that the worst is over for Macau as the gambling industry is showing clear signs of stabilization.

2.    According to the Nevada Gaming Control Board, Nevada gambling revenues increased 12% in Jan 2017 from the year-ago period to nearly $1.04 billion. This marked a turnaround from the slump witnessed in November and December. More specifically, casino revenues in the Las Vegas Strip – which account for more than half of Nevada’s total revenue – were up 14.4% year over year in the month. However, Reno recorded a 7.8% decline in casino revenues.

3.    Churchill Downs posted fourth-quarter adjusted earnings per share of 68 cents that surpassed the Zacks Consensus Estimate of 57 cents by 19.3%. It also increased 58.1% year over year owing to an increase in revenues. Net revenue of $278.3 million missed the consensus mark by 1.8% but increased 2.2% year over year.

The upside reflects additional revenues from Big Fish Games, which this Zacks Rank #4 (Sell) company acquired in Dec 2014, as well as growth in revenues from TwinSpires and Racing segments, somewhat offset by drop in Casinos revenues.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price Performance

The following table shows the price movement of the major gambling stocks over the past week and the last six months:

Company

Last Week

Last 6 Months

WYNN

5.8%

8.9%

LVS

1.8%

-1.6%

MGM

-0.04%

7.0%

MPEL

5.1%

19.3%

MCRI

6.4%

15.3%

CACQ

2.4%

22.1%

BYD

-0.7%

-0.4%

Over the last five trading sessions, share price movement of the major gambling stocks was mostly encouraging. Monarch Casino & Resort Inc. MCRI gained the maximum at 6.4% followed by Wynn Resorts Ltd.’s WYNN, which rose 5.8%. However, Boyd Gaming Corp. BYD dipped 0.7%.

Moreover, over the last six months, the price performance of gambling stocks has been predominantly positive. Among the stocks that appreciated the most were Caesars Acquisition Company CACQ and Melco Crown Entertainment Ltd. MPEL that gained 22.1% and 19.3%, respectively. On the contrary, Las Vegas Sands Corp. LVS recorded a decline of 1.6% over the same time frame.

What’s Next in the Gambling Space?

We note that gambling stocks have oscillated between gains and losses in recent sessions and investors can expect this volatility to continue in the coming days.

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Las Vegas Sands Corp. (LVS): Free Stock Analysis Report
 
Wynn Resorts, Limited (WYNN): Free Stock Analysis Report
 
Boyd Gaming Corporation (BYD): Free Stock Analysis Report
 
Melco Crown Entertainment Limited (MPEL): Free Stock Analysis Report
 
Monarch Casino & Resort, Inc. (MCRI): Free Stock Analysis Report
 
Churchill Downs, Incorporated (CHDN): Free Stock Analysis Report
 
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