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Will Melco Crown (MPEL) Miss Earnings Estimates Again? - Analyst Blog

Melco Crown Entertainment LimitedMPEL is set to report first quarter 2015 results on May 7, before the market opens. Last quarter, the company posted a negative earnings surprise of 15.38% and has a four-quarter average negative surprise of 7.00%. Let's see what is in store for the company this quarter.

Factors to Consider

Melco Crown's earnings have been sluggish over the past few quarters due to a slowdown in the Macau business since May 2014. China's crackdown on illegal money transfers, credit growth concerns, and tighter restrictions on visas pose threats to Macau's gaming revenues, raising concerns for companies like Melco Crown.

Additionally, the smoking ban in casinos and protests in Hong Kong have compounded woes. These factors have kept gamblers at bay, primarily VIP gamblers.

Gross gaming revenues in the Macau region have been declining since Jun 2014. In fact, Macau gaming revenues plunged in double digits in all three months of the first quarter due to the anti-graft corruption drive undertaken by the Chinese government. Given the scenario, revenues of Melco Crown are expected to be soft in the soon-to-be-reported quarter.

Over the last 30 days, estimates for the first quarter and 2015 have largely declined.

Earnings Whispers?

Our proven model does not conclusively show that Melco Crown is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Earnings ESP stands at -34.78%. This is because the Most Accurate estimate stands at 15 cents while the Zacks Consensus Estimate is pegged higher at 23 cents per share.

Zacks Rank: Melco Crown presently has a Zacks Rank #5 (Strong Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Conside r

Here are some companies in the gaming industry and consumer discretionary sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Isle of Capri Casinos, Inc. ISLE with an Earnings ESP of +2.44% and a Zacks Rank #1 (Strong Buy).

Vail Resorts Inc. MTN with an Earnings ESP of +0.53% and a Zacks Rank #2 (Buy).

Intrawest Resorts Holdings, Inc. SNOW with an Earnings ESP of +2.17% and a Zacks Rank #2.

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MELCO CROWN ENT (MPEL): Free Stock Analysis Report

ISLE OF CAPRI (ISLE): Free Stock Analysis Report

INTRAWEST RESRT (SNOW): Free Stock Analysis Report

VAIL RESORTS (MTN): 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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