U.S. based gaming company,
Churchill Downs Inc.
) is slated to report its second-quarter 2014 results on Jul 30.
Last quarter, it posted a negative surprise of 300.0%. Let's see
what's in store for the company this season.
Factors to Consider
Churchill Downs' earnings have missed the Zacks Consensus Estimate
in three out of the past four quarters. In fact, last quarter, the
company reported a loss of 4 cents compared to a profit of 6 cents
in the year-ago quarter. Meanwhile, revenues missed the consensus
mark through 2013 due to the adverse impacts of a sluggish U.S.
Demand for entertainment and leisure activities is sensitive to
consumers' disposable incomes. Currently, incomes have been
impacted by sluggish economic conditions. Factors like rising taxes
and increase in gasoline prices have been compelling people to
focus on their daily needs and defer non-essential and luxury
expenditures. People are avoiding lavish spending activities such
as racing and gaming, thereby hurting the profitability of this
The situation is not expected to improve in the near-term.
According to the International Monetary Fund, U.S. economic growth
is expected to be the weakest this year since the recession ended.
It expects 1.7% growth in 2014, down from 2.0% anticipated in June.
Moreover, Churchill Downs' profits are expected to be hurt by
higher interest expenses due to its higher debt levels. Year-to-
date, share price of the company has declined 3.7%.
However, the Jul 2013 acquisition of Oxford Casino in Oxford and
other joint venture and agreements should provide some support to
the top line.
Our proven model does not conclusively show that Churchill Downs is
likely to beat earnings this quarter. That is because a stock needs
to have both a positive
and a Zacks Rank #1, 2 or 3 for this to happen. That is not the
case here as you will see below.
Negative Zacks ESP:
Churchill Downs' Earnings ESP, which represents the difference
between the Most Accurate estimate of $3.09 and the Zacks Consensus
Estimate of $3.39 per share, stands at -8.85%.
Zacks Rank #4 (Sell):
We caution against stocks with Zacks #4 and #5 Ranks (Sell-rated
stocks) going into the earnings announcement, especially when the
company is seeing negative estimate revisions.
Other Stocks to Consider
Other stocks in the gaming and consumer discretionary sector that
have both a positive Earnings ESP and a favorable Zacks Rank are:
MGM Resorts International (
) with an Earnings ESP of +45.4% and a Zacks Rank #3 (Hold).
Choice Hotels International Inc. (
) with an Earnings ESP of +2.0% and a Zacks Rank #2 (Buy).
Dish Network Corp. (
) with an Earnings ESP of +15.4% and a Zacks Rank #3.
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