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What Mixed Earnings Say About Casino ETF?

Casino stocks have been suffering the curse of choppy Macau business for quite a long time now. Though the other key region for casino business – Las Vegas – has been on a recovery mode, full-fledged improvement is yet to be seen.

Notably, Macau – a Chinese territory – is one of the largest casino gaming destinations in the world. Credit crunch issues in mainland China, check on illegal money transfers especially in VIP gaming and a broad-based slowdown in China led casino operations to doze off.

Though this long-criticized zone recorded a 9.5% decline in gambling revenue in April, the fall was less than expected. This definitely sparks off hopes over positive developments in the region. Investors should note that April numbers revealed the 23rd successive monthly drop in revenues.

Against this background, casino stocks reported earnings in the last few days. Investors might be interested in knowing how badly casino earnings were hurt due to the sagging Macau business or how smartly these companies navigated the troubles, and definitely their impact on the casino ETF.

Q1 Earnings in Detail

MGM Resorts International (MGM) posted first-quarter 2016 earnings of $0.16 per share on May 5. Earnings surpassed the Zacks Consensus Estimate of $0.13 but were lower than the year-ago earnings of $0.26.

Revenues were down 5.2% to $2.21 billon and fell short of the Zacks Consensus Estimate of $2.31 billion. The downside reflects a significant decline in revenues from MGM China. VIP gambling continues to be a drag in China.  

However, net revenue at wholly owned domestic resorts was up 2.6%. MGM shares gained about 1.9% on May 5.

In late April, Las Vegas Sands Corp. (LVS) came up with first-quarter 2016 earnings per share of $0.45 that missed the Zacks Consensus Estimate of $0.61. Adjusted EPS declined almost 32% year over year due to lower revenues and profits. Quarterly net revenue of $2.72 billion missed the Zacks Consensus Estimate of $2.88 billion and declined 9.8% year over year due to weak performance in Macau.

LVS stock was down about 14.8% (as of May 5, 2016) since it reported earnings on April 20.

Wynn Resorts Ltd. (WYNN) posted mixed first-quarter 2016 results. Adjusted earnings of $1.07 per share were 52.9% higher year over year and beat the Zacks Consensus Estimate of $0.83. Revenues of $997.7 million missed the consensus mark of $1.007 billion and slipped 8.7% year over year, owing to a 13.8% decline in Macau partially made up by 0.7% rise in revenues in Las Vegas.

WYNN resorts gained about 2% after hours of May 5, after reporting earnings (see all the Consumer Discretionary ETFs here).

ETF Impact

The impact of mixed earnings should be felt in the casino gaming ETF Market Vectors Gaming ETF (BJK) as the trio has found a place in the top 10 holdings of the fund with a considerable share.

Investors should note that the Zacks Industry Rank of the above-mentioned stocks is in the top 42%, at the time of writing. While WYNN has a Zacks Rank #2 (Buy), LVS ad MGM has a Zacks Rank #3 (Hold) each.  But BJK has a Zacks ETF Rank #1 (Strong Buy), though with a High risk outlook (read: 4 Sector ETFs Jump to Top Ranks as Q1 Earnings Hit).

For investors seeking to keep a watch on this ETF in the coming days, we have taken a closer look at the details of this fund:

 BJK in Focus

 The fund looks to track the Market Vectors Global Gaming Index and provides investors a direct exposure to the casino gaming market.  The fund has so far attracted $17.8 million in assets with 44 holdings. The product is expensive as it charges 66 bps in fees per year.

Both companies – Sands China and Las Vegas Sands – have about 15% exposure in BJK. Mgm Resorts International and MGM China – together take about 7.6% of the fund. Wynn Resorts and Wynn Macau, together take about 4.2% of the fund (read: Time to Buy Casino ETF on Value?).

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MGM RESORTS INT (MGM): Free Stock Analysis Report
 
LAS VEGAS SANDS (LVS): Free Stock Analysis Report
 
WYNN RESRTS LTD (WYNN): Free Stock Analysis Report
 
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