We expect casino operator, Wynn Resorts Ltd. ( WYNN ), to beat expectations when it reports first quarter 2014 results on May 1, 2014. Last quarter, it posted a positive earnings surprise of 30.46%. We note that Wynn Resorts has outperformed the Zacks Consensus Estimate in three of the preceding four quarters with an average positive surprise of 17.76%. Let's see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Wynn Resorts is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Expected Surprise Prediction or Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.90%. This is meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank: Wynn Resorts carries a Zacks Rank #2 (Buy). Note that stocks with Zacks Ranks #1, 2 or 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Wynn Resorts' Zacks Rank #2 and +1.90% ESP makes us confident about an earnings beat.
What is Driving the Better-Than-Expected Earnings?
Over the past two quarters, Macau has remained a major contributor to Wynn resorts' revenues demonstrating that the company has started to reap benefits from the recovery of the mass market category in Macau. Gaming revenues in Macau were strong in the first quarter as well, increasing 20.1% in the quarter, according to the Gaming Inspection and Coordination Bureau. This indicates that Wynn Resorts would likely continue to generate solid sales from its Macau operations in the first quarter of the year.
Meanwhile, Wynn Resorts is also experiencing improved business in Las Vegas as leisure demand continues to improve with a gradual recovery of the U.S. economy. The visitation pattern in Las Vegas is improving and management remains hopeful on higher average daily rates. Additionally, to boost performance in Las Vegas, the company has remodeled the rooms at its properties and the baccarat pit.
Other Stocks to Consider
Here are some companies in the gaming industry and broader consumer discretionary sector that you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
MGM Resorts ( MGM ) with Earnings ESP of + 20.0% and a Zacks Rank #3 (Hold).
Cablevision Systems Corp. ( CVC ) with Earnings ESP of + 100.0% and a Zacks Rank #3.
The Walt Disney Co. ( DIS ) with Earnings ESP of + 1.03% and a Zacks Rank #2.