Who Benefits From The Bankruptcy Of Trump Entertainment Resorts?
Atlantic City certainly does not benefit from the planned closure Trump Plaza and threatened closure of Trump Taj Mahal, the only remaining properties of Trump Entertainment Resorts, which filed for bankruptcy last week.
The struggling city has seen a number of casino closures, for which many blame increasing competition from other states and from online gambling.
Rival companies such as Boyd Gaming Corporation (NYSE: BYD), Caesars Entertainment Corp (NASDAQ: CZR), Las Vegas Sands Corp. (NYSE: LVS), Penn National Gaming, Inc (NASDAQ: PENN) and Pinnacle Entertainment, Inc (NYSE: PNK) may benefit, if for no other reason than there are two fewer casinos trying desperately to attract middle-class gamblers in the United States.
Here is a quick look at how these other casino operators have fared recently and what analysts expect from them, perhaps as a gauge to which ones can most use a boost.
Boyd Gaming Corporation
Boyd operates casinos in Las Vegas and the Midwest, as well as Atlantic City. It fell short of earnings expectations in its past two quarterly reports. Its market capitalization is more than $1 billion. Its earnings per share growth forecast for this year and next are encouraging, but its return on equity is in the red and short interest is almost 10 percent of the float.
The consensus recommendation of the analysts surveyed by Thomson First Call is to hold shares, and it has been for at least three months. Despite a 5 percent gain in the past month, the share price is closer to the 52-week low than the 52-week high. The stock has outperformed Caesars and Las Vegas Sands over the past six months.
Caesars Entertainment Corp
With casinos in Atlantic City, Las Vegas and the United Kingdom, its CEO said recently that the worst may be over for Atlantic City. Caesars has a market cap of almost $2 billion. The return on equity is more than 119 percent, but short equity is about 19 percent of the float.
None of the analysts surveyed recommend buying shares, and the mean price target is less than the current share price. Shares are trading near the 52-week low hit in August, and the stock is down 42 percent year to date. Over the past six months, it has underperformed the competitors featured here.
Las Vegas Sands Corp.
In addition to Las Vegas and Macau casino resorts, this company also has one in eastern Pennsylvania. The stock was recently downgraded because of weakness in Macau. With a market cap of more than $50 billion, it is by far the largest company featured here. The price-to-earnings (P/E) ratio is less than the industry average, and the operating margin is greater than the industry average.
Of the 22 analysts polled, all but three recommend buying shares. Six of them rate the stock a Strong Buy. Yet the share price sank to a 52-week low last week and is down 21 percent year to date. The stock has outperformed Caesars in the past six months, but underperformed the others mentioned.
Pinnacle Entertainment, Inc
This company runs casinos and other entertainment facilities throughout the United States. Some shareholders are pushing for a spin-off of some properties. Pinnacle's market cap is less than $2 billion. The long-term EPS growth forecast is more than 19 percent, but short interest is more than 20 percent of the float.
The consensus recommendation is to hold shares, though it has more buy recommendations than Underperform ratings. Shares are more than 7 percent than a month ago and hit a multi-year high this past week. Over the past six months, the stock has outperformed all the rivals featured here.
Penn National Gaming, Inc
Based in Pennsylvania, this company operates casinos throughout North America. The $899 million market cap company saw several top-level executives buy up shares this summer. Here, too, the return on equity is in the red, and long-term EPS growth forecast is only about 5 percent.
Eight of the 15 surveyed analysts recommend buying shares, with three of them rating the stock at Strong Buy. Despite a gain of more than 5 percent in share price in the past month, the stock is down about 20 percent year to date. The stock has outperformed Boyd and Caesars over the past six months.
At the time of this writing, the author had no position in the mentioned equities.
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