We’re still in the early days of the second quarter earnings season, though we’ll be immersed with data in coming days thanks to a torrent of reports coming from casino companies.
So far, however, it appears that it’s still steady as she goes. Consider:
Two major companies that have reported as of this writing, destination resort operator Las Vegas Sands and locals-regional operator Boyd Gaming, revealed no surprises either in how the quarter played out, current business conditions or for their outlook.
Three others, IGT, Penn National and Churchill Downs, reported positive numbers with IGT knocking the cover off the ball, PENN having raised its earnings guidance and investors bid up Churchill Downs more than 10 percent in the immediate aftermath of its earnings.
Independent sources of information show the same trends.
In Fantini’s National Revenue Report, for example, we reported year-to-date casino revenues from all sources rose a healthy 5.47 percent in June to $3.754 billion. Even factoring out new casinos and new revenue streams such as sports betting, revenues rose 2.79 percent on a same-store basis. Both total and same-store figures beat year-to-date growth of 3.64 and 1.55 percent, respectively. And, those year-to-date numbers are important because they show sustained growth, as they have for several years.
It is worth noting that the growth came despite severe weather that shut down riverboat casinos in several markets because of Mississippi River flooding. Severe weather continued into July with Hurricane Barry, for example, slamming the Louisiana and Mississippi Gulf Coast over what should have been a profitable weekend.
The outlook based on what companies are willing to spend shows the same steadiness. In the second quarter Eilers-Fantini Quarterly Slot Survey, casino managers said they intend to replace 7.9 percent of the machines on their floors this year. That is within the range they have been reporting for some time.
If home prices are indicative of the health and outlook for the locals casino market in Las Vegas, the 6.4 percent growth in home prices reported by the latest S&P Core Logic Case-Shiller survey is encouraging. That topped the 20 markets surveyed. Las Vegas is also the nation’s third fastest-growing metro area. Combine growth in size and value and you get the formula for accelerated gaming and entertainment growth.
In the midst of this positive data, the Federal Reserve Board decided to cut interest rates a quarter point. Normally, investors welcome rate cuts for their ability to goose the economy and keep borrowing costs low.
In this case, however, the immediate reaction was that stocks sold off, especially as Fed Chairman Jerome Powell seemed to have difficulty communicating just why rates are being cut now, whether this is the start of a series of cuts, and what happens if a recession comes and all the interest-rate-cutting bullets have been fired.
Powell eventually appeared to ease concerns of either a pending recession or needlessly firing those bullets and the stock market recovered some of those sudden losses just as suddenly.
As in so many cases, it is easy for the stock market to react. But as other data suggests, it still appears that the economy underpinning the gaming industry remains steady as she goes.
