Gambling Stock Roundup: Earnings Beat at MGM Resorts, Melco Crown and Full House Disappoint - Analyst Blog

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Last week, MGM Resorts International ( MGM ) posted mixed second quarter results. Earnings beat the Zacks Consensus Estimate, while revenues missed the same. Meanwhile, Melco Crown Entertainment Limited ( MPEL ) and Full House Resorts Inc. ( FLL ) posted disappointing results and missed the consensus estimates on both fronts. As a result, share price of Melco Crown plunged 4.9% while Full House lost just 1.3%.

Caesars Entertainment Corporation ( CZR ) dominated the headlines with various issues related to the positioning of its subsidiary Caesars Entertainment Operating Company, Inc. ('CEOC') for a stock listing and significant deleveraging. (Read: Caesars Entertainment Soars on Funding Plan ).

Also, Penn National Gaming Inc. ( PENN ) announced its plans to open Hollywood Gaming at Mahoning Valley Race Course on Sep 17. Meanwhile, Iao Kun Group Holding Company Limited announced that Rolling Chip Turnover for the month of July at the company's VIP rooms in Macau was $1.60 billion, up 7% year over year. (Read last to last week developments: Gambling Stock Round up for Aug 4, 2014 )

Recap of the Week's Important Stories:

1. MGM Resorts posted mixed second quarter results with adjusted earnings of 21 cents per share beating the Zacks Consensus Estimate of 12 cents by a wide margin and increasing significantly year over year. The upside reflects improved performance in Las Vegas - its domestic territory.

In the quarter, total revenue increased 4% year over year to $2.58 billon driven by an increase in revenues from Las Vegas operations. However, it marginally missed the Zacks Consensus Estimate of $2.59 billion due to a sluggish Macau market. (Read: MGM Resorts (MGM) Beats Q2 Earnings on Domestic Growth )

Reportedly, MGM Resorts expects approval to operate in New Jersey within the next few months. The company had agreed to exit the state in 2010 by selling its Atlantic City casino resort after state regulators found the company's Macau joint venture with Pansy Ho Chiu-king unsuitable.

The company indicated that the approval would allow it participate more actively in the operations of the Borgata Hotel Casino & Spa in Atlantic City, which it co-owns with Boyd Gaming Corporation. We need to wait and see how this approval helps the company in improving profitability as the market, which was once the gambling hub of the East Coast, is currently reeling under pressure owing to stiff competition.

2. Melco Crown posted second-quarter 2014 results with adjusted earnings of 30 cents per share that missed the Zacks Consensus Estimate of 37 cents by 18.9%. Further, earnings declined from the year-ago figure of 35 cents by 12.4%. The downside reflects lower-than-expected revenues. In the quarter, net revenue declined 7.4% year over year to $1.20 billon and also missed the Zacks Consensus Estimate of $2.59 billion by 9.4% due to lower group-wide rolling chip revenues, partially offset by improved mass market table games revenues. (Read: Melco Crown Misses Q2 Earnings, Revenues on Macau Slowdown )

3. Full House Resorts posted disappointing second quarter 2014 results due to ongoing competition and soft economic conditions, particularly in the Midwest. Adjusted loss of 4 cents compared unfavorably with breakeven results in the year-ago quarter and was also wider than the Zacks Consensus Estimate of a loss of 2 cents. The downside reflects a decline in revenues and increase in food and beverage, and hotel costs.

Total revenue was $31.3 million, down 14.7% year over year. The number also missed the consensus mark by 6%. Lower revenues at all its casino operations, Northern Nevada, Midwest and Gulf Coast were primarily responsible for this decline.

4. Share price of Caesars Entertainment plunged 9.6% on Aug 5 after it was reportedly sued by note holders who said billions of dollars of assets were fraudulently transferred out of CEOC to keep the properties out of the reach of creditors. However, Caesars Entertainment indicated that it is just preparing the CEOC unit for a stock market listing and the asset transfers would allow it to generate cash of more than $3 billion while shedding its capital intensive projects.

In one other development, Caesars Entertainment with its subsidiary CEOC filed a suit in the Supreme Court against certain institutional investors. The company claims that these investors have made attempts to spoil CEOC's restructuring efforts and that it would go into default.

Further, Caesars Entertainment with $23 billion debt is assessing a proposal from senior bondholders to cut debt at its most indebted unit and keep it out of bankruptcy. The proposal would trim debt in exchange for a mix of new debt, cash and securities that would gain value as the company recovers.

Also, Caesars Acquisition Company ( CACQ ) announced that Caesars Growth Partners (CGP) will make a pro rata distribution to its members, i.e. Caesars Acquisition Company and subsidiaries of Caesars Entertainment Corporation ('CEC'), of all of CEOC's 6.5% senior notes due 2016 and 5.75% senior notes due 2017 owned by a subsidiary of CGP. These Senior Notes were contributed to CGP by CEC's subsidiary when CGP was formed. This distribution will give Caesars Acquisition Company and CEC flexibility to realize value from the disposition or sale of the Senior Notes.

5. Penn National Gaming announced that subject to regulatory approval, its Hollywood Gaming at Mahoning Valley Race Course will be opened on Sep. 17. Located in Austintown, OH, this $250 million property would bring top-flight gaming and entertainment to the Mahoning Valley region and also provide an economic impetus.


Last week continued to remain unfavorable for casino operators. Share price of Wynn Resorts Ltd., Las Vegas Sands Corp., MGM Resorts and Melco Crown declined after Macau July revenue details were announced. Reportedly, VIP gaming experienced a decline of 13% compared to 17% in June. However, mass market growth slowed down drastically from 24% in June to 16% in July. Though the World Cup was primarily responsible for the decline, we cannot ignore the economic slowdown in China and other related factors.

Meanwhile, shares of Caesars Entertainment and Caesars Acquisition Company declined due to lingering issues related to the listing of CEOC. On the other hand, Boyd Gaming Corporation has not been able to recover since it posted disappointing second quarter results on Jul 31, 2014. However, we note that Caesars Entertainment declined the most at 12.7%, followed by Melco Crown that experienced a decline of 8.8%.

Over the last six months period, only MGM Resorts gained 5.9%. Meanwhile, all other stocks declined over the same time frame with Caesars Entertainment and Melco Crown Entertainment Limited declining the most, 32.4% and 20%, respectively.

Company Last Week Last 6 months
WYNN -3.8% -4.2%
LVS -6.3% -4.3%
MGM -5.8% 5.9%
MPEL -8.8% -20%
CACQ -1.9% -4.3%
BYD -3.0% -6.7%
CZR -12.7% -32.4%

What's Next in the Gambling World?

Caesars Entertainment Corporation with an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell); Caesars Acquisition Company with an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold) along with Limited are all set to release their second-quarter 2014 results on Aug 11, 2014.

Century Casinos Inc. also with an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold) will report second quarter results on Aug 14, 2014.

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

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MGM RESORTS INT (MGM): Free Stock Analysis Report

MELCO CROWN ENT (MPEL): Free Stock Analysis Report

PENN NATL GAMNG (PENN): Free Stock Analysis Report

CAESARS ENTERTN (CZR): Free Stock Analysis Report

FULL HOUSE RESO (FLL): 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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