Market Overview

Macau Estimates Still Too High, Wells Fargo Sees 10% EPS Downside

Share:
Macau Estimates Still Too High, Wells Fargo Sees 10% EPS Downside

In a report published Monday, Wells Fargo analyst Cameron McKnight commented on Macau's gaming sector, stating that "stabilization does not equal growth" and the market is adjusting to a "new normal."

According to McKnight, the "new normal" consists of tighter government oversight, a "more muted" medium-term revenue growth rate, and a recovery that is likely to be "flatter than prior rebounds." With that said, the analyst noted that his second quarter and 2015 Macau EBITDA estimates are now 10 and 11 percent below consensus estimates (which are "still too high"), respectively, based on a negative 33 percent year-over-year same-store growth and negative 31 percent year-over-year total growth.

Related Link: How Small, Regional U.S. Casino Companies Are Beating The Biggest Names In The Business

McKnight said he is not expecting any significant same-store revenue improvements in the near-term given China's policy actions towards the region.

"We assume ADRs will start to improve in July after a full month of Galaxy data has been added," McKnight wrote. "However, once revenues do improve, we do not expect a sharp ‘V-shaped' recovery like 2009 and 2013, given policy settings and lack of broad-based economic stimulus in China."

The analyst also suggested that there is "material" downside risk to estimates and noted that there is a 10 percent downside risk to companies operating in the space.

Estimate Changes:

  • McKnight revised his full year 2015 earnings per share estimate on Las Vegas Sands Corp. (NYSE: LVS) to $2.54 from a previous $2.66.
  • McKnight revised his full year 2015 earnings per share estimate on Wynn Resorts, Limited (NASDAQ: WYNN) to $2.29 from a previous $2.79.
  • McKnight has no full year estimates on MGM Resorts International (NYSE: MGM) and Melco Crown Entertainment Ltd (ADR) (NASDAQ: MPEL).

Latest Ratings for WYNN

DateFirmActionFromTo
Oct 2019MaintainsBuy
Sep 2019UpgradesNeutralBuy
Sep 2019MaintainsEqual-Weight

View More Analyst Ratings for WYNN
View the Latest Analyst Ratings

Posted-In: Cameron McKnight Macau Macau GamingAnalyst Color Analyst Ratings Best of Benzinga

 

Related Articles (LVS + MGM)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
XLNXCascendUpgrades115.0
CISNBairdDowngrades10.0
WDAYSociete GeneraleUpgrades
BKUDA DavidsonInitiates Coverage On39.0
JDVertical GroupInitiates Coverage On
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

North Carolina Retirement Systems $9.1B Plan Recommits To Prudential Retirement With 5-year Contract

Susquehanna Downgrades PepsiCo, Sees 'Little' Activism Or M&A Impact In Future