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Will Cost-Control Efforts Drive Melco's (MLCO) Q2 Earnings?
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Melco Resorts & Entertainment Limited (MLCO - Free Report) is scheduled to release second-quarter 2018 numbers on Jul 24, before the market opens.
The strength across non-gaming revenues — derived from food, beverage and hotel services, is likely to have aided overall profits in the second quarter of 2018. Also, the company’s cost-control mechanisms are expected to have driven earnings. However, a difficult operating environment in Macau is likely to weigh upon the company’s gaming revenues in the second quarter.
Notably, Melco’s shares have lost 16.2% year to date, underperforming the industry’s collective decline of 5.4%.
Let’s delve deeper to find out how the company’s top and bottom line will look in the second quarter earnings result.
Cost-Control Initiatives to Drive Earnings
Melco’s cost-control efforts, such as the effective management of marketing expenses, have successfully reduced its operating costs in the first quarter of 2018 and are likely to have aided second quarter profits and margins as well. In the first quarter, total operating costs and expenses declined 2.4%. As a result, earnings grew 39.3% year over year.
For the second quarter of 2018, the Zacks Consensus Estimate for the bottom line is pegged at 25 cents, suggesting an increase of 56.3% from the year-ago quarter.
Slowdown in Macau Likely to Hurt Top Line
Macau, which is the world’s largest gambling hub, has disappointed investors, with lower-than-expected revenues for two successive months in May and June. Gambling revenues from Macau increased 12.5% to 22.49 billion patacas ($2.78 billion) in June. The metric not only lagged analysts’ expectations but also declined 12% from the figure registered in May. Even though gambling revenues were up for the 23rd straight month, it still remained below the highest level achieved in 2012.
Lower revenues are expected to dent Melco’s top line, as the company receives a substantial amount of revenues from Macau. Subsequently, consensus estimates peg second-quarter revenues at $1.2 billion, reflecting a 5.2% year-over-year decline.
Our Quantitative Model Doesn’t Suggest A Beat
Our proven model does not show that Melco is likely to beat earnings estimates this quarter. This 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Melco Resorts has an Earnings ESP of -10.20% and a Zacks Rank #5 (Strong Sell).
We caution against stocks with a Zacks Rank #4 (Sell) or 5 going into earnings announcement, especially, when the company is seeing negative estimate revisions.
Melco Resorts & Entertainment Limited Price and EPS Surprise
Here are some gaming stocks that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat in the to-be-reported quarter:
Las Vegas Sands (LVS - Free Report) has an Earnings ESP of +2.16% and it currently carries a Zacks Rank #3. The company is scheduled to report quarterly numbers on Jul 25.
Churchill Downs (CHDN - Free Report) has a Zacks Rank #2 and an Earnings ESP of +3.75%. The company is slated to release quarterly numbers on Aug 1.
Red Rock (RRR - Free Report) , carrying a Zacks Rank #2, has an Earnings ESP of +4.00%. The company is expected to release quarterly numbers on Aug 14.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Image: Bigstock
Will Cost-Control Efforts Drive Melco's (MLCO) Q2 Earnings?
Melco Resorts & Entertainment Limited (MLCO - Free Report) is scheduled to release second-quarter 2018 numbers on Jul 24, before the market opens.
The strength across non-gaming revenues — derived from food, beverage and hotel services, is likely to have aided overall profits in the second quarter of 2018. Also, the company’s cost-control mechanisms are expected to have driven earnings. However, a difficult operating environment in Macau is likely to weigh upon the company’s gaming revenues in the second quarter.
Notably, Melco’s shares have lost 16.2% year to date, underperforming the industry’s collective decline of 5.4%.
Let’s delve deeper to find out how the company’s top and bottom line will look in the second quarter earnings result.
Cost-Control Initiatives to Drive Earnings
Melco’s cost-control efforts, such as the effective management of marketing expenses, have successfully reduced its operating costs in the first quarter of 2018 and are likely to have aided second quarter profits and margins as well. In the first quarter, total operating costs and expenses declined 2.4%. As a result, earnings grew 39.3% year over year.
For the second quarter of 2018, the Zacks Consensus Estimate for the bottom line is pegged at 25 cents, suggesting an increase of 56.3% from the year-ago quarter.
Slowdown in Macau Likely to Hurt Top Line
Macau, which is the world’s largest gambling hub, has disappointed investors, with lower-than-expected revenues for two successive months in May and June. Gambling revenues from Macau increased 12.5% to 22.49 billion patacas ($2.78 billion) in June. The metric not only lagged analysts’ expectations but also declined 12% from the figure registered in May. Even though gambling revenues were up for the 23rd straight month, it still remained below the highest level achieved in 2012.
Lower revenues are expected to dent Melco’s top line, as the company receives a substantial amount of revenues from Macau. Subsequently, consensus estimates peg second-quarter revenues at $1.2 billion, reflecting a 5.2% year-over-year decline.
Our Quantitative Model Doesn’t Suggest A Beat
Our proven model does not show that Melco is likely to beat earnings estimates this quarter. This 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Melco Resorts has an Earnings ESP of -10.20% and a Zacks Rank #5 (Strong Sell).
We caution against stocks with a Zacks Rank #4 (Sell) or 5 going into earnings announcement, especially, when the company is seeing negative estimate revisions.
Melco Resorts & Entertainment Limited Price and EPS Surprise
Melco Resorts & Entertainment Limited Price and EPS Surprise | Melco Resorts & Entertainment Limited Quote
Stocks Poised to Beat Earnings Estimates
Here are some gaming stocks that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat in the to-be-reported quarter:
Las Vegas Sands (LVS - Free Report) has an Earnings ESP of +2.16% and it currently carries a Zacks Rank #3. The company is scheduled to report quarterly numbers on Jul 25.
Churchill Downs (CHDN - Free Report) has a Zacks Rank #2 and an Earnings ESP of +3.75%. The company is slated to release quarterly numbers on Aug 1.
Red Rock (RRR - Free Report) , carrying a Zacks Rank #2, has an Earnings ESP of +4.00%. The company is expected to release quarterly numbers on Aug 14.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>