Last week was quite eventful for the gambling industry with revenues for January rising marginally in Macau. Though this marked the sixth consecutive month of growth, following the extended slump of over two years, the slow improvement signifies that the recovery might not be that smooth.

On the other hand, the Nevada Gaming Control Board announced a decrease in revenues in the region in December.

In a separate development, Penn National Gaming Inc. (PENN Quick QuotePENN - Free Report) posted mixed fourth-quarter and full-year 2016 results. Though earnings compared favorably with Zacks Consensus Estimate, revenues missed the mark.

Recap of the Week’s Most Important Stories  

1.    Gross gaming revenues for January rose 3.1% on a yearly basis to approximately $2.4 billion or 19.3 billion patacas, per the Macau Gaming Inspection and Coordination Bureau. This marked the sixth successive month of gains, thereby continuing the revival in Macau.

However, the rise was below the 8% increase recorded in Dec 2016 and the median estimate of an 8.5% gain by Bloomberg analysts. New resorts continue to attract tourists and leisure gamblers, giving a boost to revenues. However, casino operators are bearing the brunt of cannibalization effect with the latest properties drawing in crowds at the expense of existing ones. Moreover, the January figures indicate that the Chinese New Year holidays, which began late last month, will not be as big of a boon as anticipated.

Notably, a tough operating environment in Macao weighed on the stock in 2015 and for the most part of 2016. Notably, the crackdown on corruption in China compelled Macau officials to impose restrictions on high rollers to stop billions of dollars from being siphoned off illegally from mainland China to Macau.

Consequently, this lowered footfall at local casinos. A slowdown in China, tighter visa policies, political unrest and a smoking ban on mass market gaming floors compounded the woes. In fact, the anti-graft corruption drive undertaken by the Chinese government is still keeping VIP gamblers at bay.

Nonetheless, efforts undertaken by Macau operators to revive revenues by wooing tourists and recreational gamblers with family-friendly resorts and more non-gaming facilities have started yielding results as evident from gambling revenue growth in the past six months. Thus, though the worst may be over but the slow progress suggests that Macau’s recovery is going to be quite volatile and choppy.

2.    According to the Nevada Gaming Control Board, Nevada gambling revenues dropped 2.7% in Dec 2016 from the year-ago period to nearly $956.1 million. The decline follows the fall in November. More specifically, casino revenues in the Las Vegas Strip – which accounts for more than half of Nevada’s total revenue – were down 1.7% year over year in the month. However, Reno recorded a 14.1% rise in casino revenues.

3.    Penn National Gaming posted fourth-quarter 2016 earnings of 5 cents, which compared favorably with Zacks Consensus Estimate of a loss of 14 cents. Meanwhile, the figure also improved over the year-ago quarter’s loss of 11 cents on the back of higher revenues. Moreover, results were significantly better than management’s expectation of a loss of 15 cents.

Net revenue of $742.9 million increased 1.2% year over year due to a rise in revenues at South/West, Midwest and Other segments, partially offset by a decline in the Northeast segment. However, this Zacks Rank #5 (Strong Sell) company missed the consensus mark by a mere 0.07% and also fell slightly short of the management’s guidance.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price Performance

The following table shows the price movement of the major gambling stocks over the past week and the last six months:

Over the last five trading sessions, share price movement of the major gambling stocks witnessed a mixed trend. While Boyd Gaming Corp. (BYD Quick QuoteBYD - Free Report) gained the maximum at 3.5% followed by Caesars Acquisition Company’s rise of 0.7%, Wynn Resorts Ltd. (WYNN Quick QuoteWYNN - Free Report) and Melco Crown Entertainment Ltd. recorded a decline of 5.5% and 3.8%, respectively.

However, over the last six months, the price performance of gambling stocks has been predominantly positive. Among the stocks that appreciated the most were Caesars Acquisition Company and Melco Crown that gained 33.0% and 21.4%, respectively. On the contrary, Wynn Resorts recorded a decline of 1.4% over the same time frame.

What’s Next in the Gambling Space?

We note that gambling stocks have oscillated between gains and losses in recent sessions and with the earnings season in full swing, investors can expect this volatility to continue in the coming days.

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