Casino Stocks Primed for Third-Quarter Earnings Beats
The third quarter was a forgettable one for gambling casino stocks, as the group shrunk alongside the broader market. But those declines could belie a strong plenty of earnings.
With the arrival of the quaternary quarter, so comes a unexampled earnings season, and some analysts trust August 144 gaming revenue (GGR) from the Las Vegas Strip implies possible upside to gambling casino operators’ third-quarter profit estimates. Strip GGR inward the octad month of the year checked in at $659 million, representing a year-over-year step-up of 5%, with gains inward slot, mass market place table, and VIP play. That’s despite ane less weekend daylight inwards the month.
For September, we contrive $680m +6% YoY (+3% seq), which would final result inward 3Q22 +3% YoY and 3% seq. This compares to consensus EBITDA of +23% YoY and -6% seq for the Vegas aggroup as most of the YoY ontogeny is being goaded by non-gaming revs, including enter Strip revenue per usable way (RevPAR),” wrote Macquarie analyst Chadic language Beynon inward a unexampled report.
The Silver State Gaming Control Board (NGCB) hasn’t in time delivered its Sep report. But the August update marked the 18th sequent month inwards which the state’s casinos topped $1 1000000000 inwards combined monthly revenue.
Where Casino Stocks Earnings Opportunities Lie
Amid myriad challenges in Macau and no more exposure to the US, Las Vegas Sands’ (NYSE:LVS) third-quarter results will largely follow evaluated through and through the lense of Marina Bay Sands inwards Singapore.
Rival Wynn Resorts (NASDAQ:WYNN) has some avenues for offsetting Macau exposure past way of Wynn and Encore on the Strip and Encore capital of Massachusetts Harbor. But when it comes to casino stocks, the current, prevailing consensus is a taste for the names with exposure to Las Vegas, including the Strip, downtown, and locals.
“Against consensus estimates for companies exposed to LV Strip, LVL or Reno, we believe consensus appears to be achievable,” added Beynon. “As we’ve noted, LV searches remain strong, albeit with a shortsighted reservation window. Overall ‘searches’ were +7% MoM inward August, followers 5% inwards June and 3% in July, with continued strength inward the September/October hunting period, albeit with more or less lower growing for searches over the next 30–90-day period.”
The analyst notes that Strip operators could human face some difficulties following a brisken summer go season. But Raiders home games, the take up of the NHL flavor (Golden Knights), and a possible rebound inwards pattern and group meeting business sector are factors that could living GGR into year-end.
Casino Stocks to Examine as Earnings Season Looms
In terms of Strip exposure, MGM Resorts International (NYSE: MGM) and Caesars Entertainment (NASDAQ:CZR) lead story the way, as that region accounts for 47% and 45% of their respective revenues, according to Macquarie.
“Given the marketplace sell-off, we keep trust there’s economic value in the group. Off of current ’23 EBITDA estimates, MGM and CZR are at present trading sub 7x EV/EBITDA, however, we observe this multiple could climb up if 2023 estimates are decreased further as sentiment continues to weaken,” said Beynon.
While the Strip is the epicentre of the US gaming industry, other Nevada markets, including downtown Las Vegas, locals, and Reno, are showing signs of life, noted Beynon. Vibrancy downtown and inwards the Las Vegas locals market place could auspicate intimately for Boyd Gaming (NYSE:BYD) and Red John Rock Resorts (NASDAQ:RRR).