Wynn Resorts Ltd.WYNN is set to report first-quarter 2016 results on May 5, after the market closes. Last quarter, the company posted a positive earnings surprise of 39.19%.
However, this casino operator has posted an average negative earnings surprise of 4.60% over the trailing four quarters.
Factors to Consider
On Apr 5, Wynn Resorts announced preliminary results for the first quarter for the Macau and Las Vegas divisions. Net revenue in Las Vegas is expected in the range of $384-$394 million, compared with $386.9 million reported a year ago.
The company projects first-quarter revenues at the Macau division in the range of $603 million to $613 million, lower than $705.4 million reported in the prior-year quarter. The anti-graft corruption drive undertaken by the Chinese government is expected to continue hurting the VIP business in Macau. Moreover, China's crackdown on illegal money transfers, credit growth issues and tighter restrictions on visas has posed considerable threats to Macau's gaming revenues, thereby raising concerns for Wynn Resorts. Further, the slowdown in the Chinese economy will keep hampering the company's top line.
In spite of dull expectations, Wynn Resorts' earnings in the to-be-reported quarter are expected to be driven by improving demand at its Las Vegas properties, which reflects growing employment rates and the rise in tourism. With the Las Vegas Strip recording high occupancy rates throughout 2015, the company has seen solid growth in resort revenues, which should in turn boost the top line. Expansion of its resort portfolio and non-gaming options should further propel first-quarter revenues.
Our proven model does not conclusively show that Wynn Resorts 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 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. Unfortunately, that is not the case here, as you will see below.
Zacks ESP: Wynn Resorts has an Earnings ESP of -4.82%. This is because the Most Accurate estimate is pegged at 79 cents, while the Zacks Consensus Estimate stands higher at 83 cents.
Zacks Rank: The company's Zacks Rank #3 increases the predictive power of the ESP. However, we need to have a positive ESP to be sure of an earnings beat.
Meanwhile, 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 That Warrant a Look
Here are some stocks in the broader 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:
Cinemark Holdings, Inc. CNK , with an Earnings ESP of +2.13% and a Zacks Rank #2.
Central Garden & Pet Company CENT , with an Earnings ESP of +3.39% and a Zacks Rank #2.
PVH Corp. PVH , with an Earnings ESP of +0.70% and a Zacks Rank #3.