The second quarter earnings season has started off with a bang for gaming companies.
First there was Scientific Games, growing revenue and cutting debt better and faster than expected.
CEO Kevin Sheehan had done this once before, guiding Norwegian Cruise Lines through the phenomenon of cutting costs and debt while growing the business.
Naturally, he met with skepticism when he arrived a year ago at Sci Games, especially because the company still had the added challenges of completing the integration of the management teams and cultures of what not that long before, were four different companies.
The progress made in the fourth quarter apparently dispelled those concerns as the stock soared 30 percent to new 52-week highs almost five times greater than the lows that greeted Sheehan.
Then there was Monarch Casino, the operator of one casino in Reno and another in Black Hawk, Colorado, also beating expectations and being rewarded with a new 52-week high.
Those who’ve read this column for a while know that I’m a fan of Monarch, CEO John Farahi and COO David Farahi, and think the stock has a way to run. The good news is that the second quarter reflects organic growth and comes despite construction disruption at Black Hawk, which is undergoing a transformation from a small property into a destination resort. The potential from that project remains, meaning Monarch remains a growth story.
Then came Wynn Resorts beating expectations on a very strong performance in Macau.
Wynn was followed by Las Vegas Sands, its neighbor on the Las Vegas Strip and in Macau. LVS was expected to disappoint based on inferred revenue trends in Macau in recent months. The fact that the company beat expectations caught investors by surprise and they bid up the stock price.
Some of the company’s good numbers came from high table hold in Singapore, but the bigger point is that Macau and Singapore, table hold aside, grew impressively.
LVS has no major construction projects scheduled, meaning it can use its growing cash flows to reward shareholders with dividend increases, share repurchases, and by reducing debt if it so decides.
Meanwhile, LVS indicated that it isn’t going to just sit around until the next big project. It has adopted a $500 million a year program to renovate and improve existing properties.
Then came Penn National, once again beating expectations and raising guidance.
PENN was followed by its offspring, the REIT Gaming and Leisure Properties, also beating guidance, issuing an optimistic forecast and bumping up the quarterly dividend to 63 cents a share, meaning GLPI will now yield 6.7 percent.
MGM Resorts followed, beating on the bottom line though missing analyst revenue estimates. Melco Resorts went the opposite direction, missing on earnings and beating on revenue.
Still, both MGM and Melco give reason for bullishness. The third quarter should be strong in Las Vegas, and growing profits is the name of the game, after all, and MGM has its new focus on profitability. Macau’s rebound is starting to look sustainable, which will benefit Melco the most as it is almost entirely a Macau story.
On the regional front, Boyd and Churchill Downs reported strong numbers.
Clearly, the early reporters have set a bullish trend.
The question will soon need to be asked if the good times can continue, and whether, for several of them, stock prices already reflect the good news.
