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Gambling Stock Roundup: Las Vegas Sands Posts In-Line Earnings, MGM Resorts and Others Work Toward Recovery - Analyst Blog

Last week, ended on a positive note as Las Vegas Sands Corp.'s ( LVS ) earnings came in line with the Zacks Consensus Estimate. This created a sense of hope for other gambling companies that also earn a major part of their revenues from Macau. Share prices of most players in the space increased as investors found something to cheer about.

Macau has been posting weak performance over the past few months. Growth in mass market gambling and the non-gaming segment partly tempered the effect of a decline in VIP gambling.

Other stocks continued to work toward recovery. While Caesars Entertainment Corp. ( CZR ) officially announced that it is in discussions with certain bank debt creditors to curtail its debt, Pinnacle Entertainment Inc. ( PNK ) opened a new gaming terrace at its Belterra Park Gaming & Entertainment Center in Ohio that will permit smoking on premises.

In one other development, MGM Resorts International ( MGM ) is reportedly planning to sell the Gold Strike Hotel & Gambling Hall located in Nevada. (Read last to last week's development: Gambling Stock Round Up for Oct 13, 2014 )

Recap of the Week's Important Stories:

1. Las Vegas Sands ' third quarter 2014 adjusted earnings of 84 cents per share were in line with the Zacks Consensus Estimate while it increased 2.4% year over year owing to lower operating expenses. Quarterly net revenue of $3.53 billion missed the Zacks Consensus Estimate of $3.67 billion by 3.8% and declined 1% year over year. Gross gaming revenues in Macau had declined in all the three months of the quarter.

The downside reflects the slowdown in gambling in Macau as high-stake gamblers curtailed spending amid a cooling Chinese economy. Also, it comes in the wake of a nationwide crackdown on corruption in China that 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. (Read: Las Vegas Sands' Q3 Earnings in Line, Revenues Miss )

2. Caesars Entertainment and its subsidiary Caesars Entertainment Operating Company, Inc. (CEOC) issued a filing stating it has begun formal discussions with certain bank debt creditors to find ways to ease pressure on its $24.2 billion debt. This reflects the company's commitment to work constructively with creditors to deleverage its most senior lenders of its largest unit, CEOC and create a sustainable capital structure for CEOC that is in the best interest of all stakeholders.

In fact, the company has been working on these lines for quite some time. Two weeks back, the company announced in a SEC filing that it has granted CEOC, a right to receive first claim to the potential payments. Per the right, these lenders get the first right to possible proceeds from the lawsuits brought against the company.

Prior to that, the company designed a comprehensive plan to aid independent stock listing and significant de-leveraging of its subsidiary, Caesars Entertainment Operating Co. (CEOC). (Read: Caesars Entertainment Soars on Funding Plan )

3. MGM Resorts has reportedly entered into a purchase and sale agreement last week with JETT Gaming and Jean Ventures to sell the Gold Strike Hotel & Gambling Hall located in Nevada for an undisclosed amount. JETT Gaming is a slot machine route company that owns and operates slots at 131 locations and is owned by the Herbst family. The sale comes in the wake of the company's continued efforts to refine its portfolio and focus on new developments in international and regional market.

4. Pinnacle Entertainment opened a new gaming terrace at Belterra Park Gaming & Entertainment Center in Cincinnati, OH with a smoking facility. The terrace featuring 82 video lottery terminals and beverage service and other amenities has its own entrance from Belterra Park's gaming floor. The gaming terrace will be open all throughout the year. Moreover, this gaming terrace with a smoking facility is the first of its kind in Cincinnati.

This Gaming & Entertainment Center features 1,500 games and six dynamic restaurants, River Downs Club where simulcast wagering takes place, a VIP Lounge, live racing on a 1 mile dirt track, pari-mutuel wagering and complimentary self and valet parking. Also, a turf track will be opened at this entertainment destination marking the first turf track in Ohio.

5. In one other development, the Massachusetts Gaming Commission announced that Penn National Gaming Inc. ( PENN ) has exceeded its construction diversity vendor goals during the construction period of Plainridge Park Casino. The projects goals were to provide 4% contracts for minority-owned businesses, 7% for women-owned businesses, and 3% for veteran-owned businesses.

However, to date when the project is 50% complete, the company has already offered 13% of its contracts to minority-owned businesses, 17% to women-owned businesses, and 14% to veteran-owned businesses, meeting its corporate social responsibility.

Plainridge Park Casino will feature a fully integrated 106,000 square foot racing and gaming facility including live harness racing and simulcasting with 1,250 slot machines; an upscale casual dining restaurant, sports bar, food court and many other amenities. It is scheduled to open in Jun 2015.

Performance

All gambling stocks increased during the last week. Caesars Acquisition Company ( CACQ ) surged 28.1% followed by Boyd Gaming Company ( BYD ) that increased 8.4%.

Surprisingly, share prices of the companies that earn a majority of their revenues from Macau increased despite rating downgrades and a decline in target prices by various analysts as they expect Macau to continue to face uncertainty. Therefore, the sudden increase in all the gambling stocks after a prolonged period of decline cannot be regarded as a turnaround. Instead, we would prefer to wait for more substantial and consistent improvement.

Over the last six months, all gambling stocks lost value with Caesars Entertainment and Caesars Acquisition witnessing the maximum decline of 51.6% and 33.6%, respectively.

Company Last Week Last 6 months
WYNN 3.3% -15.1%
LVS 5.6% -19%
MGM 4.6% -13.8%
MPEL 3.5% -31.9%
CACQ 1.3% -33.6%
BYD 8.4% -25.5%
CZR 28.1% -51.6%

What's Next in the Gambling World?

Wynn Resorts Ltd. that has a Zacks Rank #4 (Sell) and an Earnings ESP of -1.11% would likely report earnings this week. Meanwhile, Penn National Gaming with a Zacks Rank #4 and an Earnings ESP of -16.67% is set to report third quarter 2014 results on Oct 23, 2014.

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

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LAS VEGAS SANDS (LVS): Free Stock Analysis Report

MGM RESORTS INT (MGM): Free Stock Analysis Report

PINNACLE ENTRTN (PNK): Free Stock Analysis Report

BOYD GAMING CP (BYD): Free Stock Analysis Report

PENN NATL GAMNG (PENN): Free Stock Analysis Report

CAESARS ENTERTN (CZR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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