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The Zacks Analyst Blog Highlights: Haverty Furniture, MGM Resorts International, 500.com, Churchill Downs and Isle of Capri Casinos

Zacks Equity Research

For Immediate Release
Chicago, IL – August 26, 2014 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Haverty Furniture Companies Inc. (HVT-Free Report), MGM Resorts International (MGM-Free Report), 500.com Limited (WBAI-Free Report), Churchill Downs Inc. (CHDN-Free Report) and Isle of Capri Casinos, Inc. (ISLE-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Monday’s Analyst Blog:

Haverty Furniture Down to Strong Sell on Sluggish Q2

Zacks Investment Research downgraded Haverty Furniture Companies Inc. (HVT-Free Report) to a Zacks Rank #5 (Strong Sell) on Aug 23 after the company reported not-so-great second quarter 2014 results.

Why the Downgrade?

On Jul 30, this home furnishing retailer reported its second quarter results and posted earnings of per share of 22 cents, which missed the Zacks Consensus Estimate by a penny. Earnings were also flat from the prior-year quarter, as increase in operating costs overshadowed the year-over-year sales increase in the quarter.

Sales increased only 2.4% to $175.1 million and missed the Zacks Consensus Estimate of $176 million by a slight margin due to a slowdown in traffic. Sales growth rate was also weaker than the prior-year growth rate of 12.9%. Comparable store sales were up 3.2% in the second quarter, against 11.2% growth last year, possibly due to a slow recovery in the housing market.

Selling, general and administrative costs ratio increased 70 basis points to 49.3% in the quarter, primarily due to increases in warehouse and delivery costs, selling expenses such as commissions, and advertising, offset by reductions in administrative expenses.

The company still believes that the gradual housing market recovery will help increase sales and market share by the end of 2014. Haverty also has strong store expansion plans for 2014 to strengthen its presence in key markets with additional or repositioned stores. It is also working on its website which would feature additional shopping tools.

However, the firms are not so positive about the company’s numbers in the upcoming quarters. Estimates for the third quarter declined 7.1% and that for full year 2014 went down 4.5% over the last 30 days.

Will Vegas Continue to Drive MGM Resorts’ Growth?

On Aug 22, we issued an updated research report on MGM Resorts International (MGM-Free Report).

On Aug 5, MGM Resorts posted mixed second quarter 2014 results wherein earnings beat the Zacks Consensus Estimate while revenues missed the same. MGM Resorts’ second-quarter 2014 adjusted earnings of $0.21 per share were up significantly year over year, owing to improved performance in Las Vegas, its domestic operations.

Total revenue also increased 4% year over year to $2.58 billon driven by an increase in revenues from Las Vegas operations. EBITDA margin increased 90 basis points (bps) due to increased contribution from the high-margin main floor business.

Though tourism in Las Vegas has not yet reached pre-recession levels, it is on its way to recovery. In fact, Las Vegas is on track to break its annual visitation record. MGM Resorts is expected to witness increased occupancy and better pricing in the domestic markets, given its expansion efforts.

Through the remainder of 2014, the company expects the Las Vegas business to continue to improve driven by strong convention calendar and the completion of several capital initiatives on the Las Vegas Strip.

Meanwhile, MGM Resorts derives a solid share of its revenues from Macau, the largest gaming destination in the world. However, performance in Macau was not as strong in the second quarter as it had been in the past few quarters. In fact, Macau revenues were weaker than revenues in the Las Vegas region due to a slowdown in gambling in Macau. The slowdown can be attributed to the fact that high-stake gamblers are curtailing spending amid a cooling Chinese economy.

Also, the nationwide crackdown on corruption in China has compelled Macau officials to impose restrictions on VIP gamblers in order to stop billions of dollars from being siphoned off illegally from mainland China to Macau. This also impacted the company’s performance in Macau, especially the VIP business.

Despite concerns about sustained economic growth in China, MGM Resorts expects the Macau market to continue to grow as a result of a large and growing Asian middle class population and infrastructure improvements. These are expected to facilitate convenient travel to and within Macau.

Other Stocks to Consider

Investors interested in the gaming industry may consider stocks like 500.com Limited (WBAI-Free Report), Churchill Downs Inc. (CHDN-Free Report) and Isle of Capri Casinos, Inc. (ISLE-Free Report). While 500.com Limited sports a Zacks Rank #1 (Strong Buy), Churchill Downs and Isle of Capri Casinos carry a Zacks Rank #2.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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