Investors could be in something of a holding pattern on stocks as we head into the second quarter earnings season.
Right now, it looks like the quarter will be similar to the first, and likely will stay that way into the third quarter.
Here are some things to consider:
• U.S. regional casino operators. The second quarter represented a bit of a step back from the recent robust period. Growth continued mostly, but at a more moderate pace.
The question will be whether the casinos are seeing a slowing in spending and visitation from customers, or whether they continue to be recovering.
In an industry that has cut costs and deemphasized marketing to low-value customers, revenues alone might not tell the story.
• Macau. Numerous observers see the second quarter as the trough in Macau and expect the third quarter openings of Wynn Palace and Las Vegas Sands’ Parisian to be the start of a slow resumption of growth.
Part of that assumption isn’t just that new properties will draw more visitors, but also the belief that all the damage has been done to the VIP market so the decline in that segment should be over, or darn close to it.
No one denies that Wynn Palace and Parisian will be big draws. The question is whether they will cannibalize other properties, including those of their own companies.
The 4,700 hotel rooms and 500 gaming tables that Wynn Palace and Parisian are bringing to the market will be a big test for Wynn and Las Vegas Sands, and their competitors.
• Gaming suppliers. Scientific Games and IGT appear to be settling in after all the changes brought about by their various mergers.
The questions now will be about execution. Can SGMS sufficiently and rapidly enough bring down its debt-to-EBITDA ratio that stands around 8 to1 to allay investor concerns? Is IGT bringing coherence to the most sprawling supplier company the gaming world has ever seen?
Both companies appear to have settled in to around 25 to 30 percent ship share on slot machine sales, average sale prices appear firm, the systems and gaming operations businesses appear steady and lottery operations provide both companies with reliable revenues.
Everi is a smaller company that also needs to show investors it can progress after having gone through its own transformation. Everi is the new name for Global Cash Access, a once steady payments company until it acquired slot maker Multimedia Games and then started to produce less profit than had been promised.
All three of these companies are in “now show me” phases. So investors will be looking hard for evidence that genuine financial improvements are on the way for these stocks to recover. From their 52-week highs SGMS and IGT are off nearly 40 percent and EVRI 85 percent.
One saving grace for each company is steady revenue from a key business outside of slot machines—lotteries for SGMS and IGT and cash access for EVRI.
• Caesars. CEO Mark Frissora is on a mission to tell investors that the company is improving financial results, a fact, he believes isn’t adequately noticed because of all the attention grabbed by the contentious reorganization of Caesars Entertainment Operating Company.
In the first quarter, CZR grew EBITDA 16 percent. We’ll see if the company matches in the second quarter.
