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Here's How Things Took a Wrong Turn for Casino ETF Lately

Sanghamitra Saha
Updated

The casino gaming space saw a somber start to August. A host of mixed-to-downbeat earnings results from U.S. casino operators and lower-than-expected growth in Macau gaming revenues triggered a broad-based selloff in the space. In any case, casino stocks hail from a bottom-ranked Zacks industry (bottom 28%).

Caesars Entertainment Causes Rout in Casino Space

Caesars Entertainment’s CZR quarterly earnings of 4 cents per share beat the Zacks Consensus Estimate of a penny and also improved from the loss of 21 cents a year ago.The company posted revenues of $2.12 billion in the quarter ended June 2018, surpassing the Zacks Consensus Estimate by 0.80%.

But the company’s downbeat guidance triggered a rout in the casino space. The company acknowledged "rate pressure" on rooms due to sluggish bookings along the Las Vegas strip, and cautioned that revenue per room would be essentially flat in the third quarter, though the full-year guidance was intact.

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Shares dropped 14.4% on Aug 1 reflecting the pessimistic guidance and in fact trading was halted several times that day, per CNN Money. Taking cues from Caesars’ guidance, investors dumped almost all casino operators like MGM Resorts International MGM (down 7.4% on Aug 1), Wynn Resorts WYNN) (down 3.8% on Aug 1) and Las Vegas Sands Corp. LVS (down about 4%).

Other Downbeat Earnings Results

Wynn Resorts Misses Estimates

Wynn Resorts’ quarterly earnings of $1.53 per share missed the Zacks Consensus Estimate of $2.03 but improved from year-ago earnings of $1.18. These figures are adjusted for non-recurring items. Wynn posted revenues of $1.61 billion in the quarter ended June 2018, missing the Zacks Consensus Estimate by 5.25%. This compares to year-ago revenues of $1.53 billion. The stock lost about 7% after hours on Aug 1, reflecting its downbeat results.

Las Vegas Sands Reports a Mixed Q2

Las Vegas Sands reported lower-than-expected earnings in second-quarter 2018. Adjusted earnings per share of 74 cents missed the Zacks Consensus Estimate of 80 cents but increased 1.4% year over year on higher revenues. However, net revenues came in at $3.30 billion, outpacing the consensus mark of $3.28 billion and improving 6.2% year over year. The stock has lost about 8% in the past five days (as of Aug 1, 2018), key period after the earnings release.

MGM’s Q2 Was a Mixed Bag

The company reported quarterly earnings of 26 cents per share on Aug 2, in line with the Zacks Consensus Estimate. MGM’s revenues of $2.86 billion missed the Zacks Consensus Estimate by 4.34%. This compares to year-ago revenues of $2.64 billion. MGM foresees a subdued third quarterand has also slashed its business forecast, per Bloomberg. However, shares were not hurt on Aug 2 as investors had already gone short before the release. 

Macau Gaming Revenues Fail to Meet Estimate

If things are not upbeat on the Las Vegas Strip, Macau also couldn’t help stabilize the matter. Macau revenues, released on Aug 1, rose 10.3% year over year in July but were shy of projections of 11.5%, according to a Bloomberg survey.

Against such a downbeat scenario, investors may want to know the movement of the pure-play casino ETF VanEck Vectors Gaming ETF BJK. The fund lost about 2.4% on Aug 1.

BJK in Focus

The fund looks to track the MVIS Global Gaming Index and provides investors a direct exposure to the casino gaming market. The fund has so far attracted $31.5 million in assets and invested that in 44 holdings. The product is expensive as it charges 65 bps in fees per year.

All three above-mentioned companies have created places in the top-10 holdings of the fund with a considerable share. Both companies — Sands China and Las Vegas Sands — have about 15% exposure in BJK. MGM Resorts International and MGM China holdings call for about 7% of the fund. Wynn Resorts Ltd and Wynn Macau  account for more than 7% (see all Consumer Discretionary ETFs here).

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Las Vegas Sands Corp. (LVS) : Free Stock Analysis Report
 
MGM Resorts International (MGM) : Free Stock Analysis Report
 
Caesars Entertainment Corporation (CZR) : Free Stock Analysis Report
 
VANECK-GAMING (BJK): ETF Research Reports
 
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