The economy seems to be getting stronger and stronger, so is it time to take a calculated gamble? Now that people likely have more disposable cash on hand, investors might want to turn their attention back to Las Vegas.
This article was originally published by Zacks.com.
The economy seems to be getting stronger and stronger. Unemployment is on its way down. The stock market (S&P 500) is making all-time highs, so is it time to take a gamble?
I'm not talking about any gamble, I want a calculated gamble. One that will pay off because times are getting better and that means there is likely to be more disposable cash on hand. Where do people go to spend (or lose) disposable cash? VEGAS!
Let's take a look at three stocks that have high Zacks Ranks and could be worth a gamble.
MGM Resorts (MGM) has been on a nice run over the last month or so. The stock has jumped from about $12 and is now looking to test the $16 range and that move may be the start of even better things to come.
A big reason for the move was the most recent earnings report. The company reported its first profit in more than seven quarters, and did so with the Zacks Consensus Estimate calling for a loss of $0.10 per share in the quarter. By reporting $0.03 MGM delivered a 130% positive earnings surprise.
This swing into the black has inspired analysts to move earnings estimates for the casino operator significantly higher. Only six months ago, analysts were calling for a loss of $0.50 for 2013. Estimates have moved up since then, but really jolt higher from a loss of $0.27 to a loss of $0.06 following the most recent quarterly report.
Similarly the Zacks Consensus Estimate for 2014 moved from a loss of $0.024 in November 2012 to the current level of a gain of $0.10. Just one month ago, the consensus was look for a loss of $0.09 in 2014, so the prospects look that much better.
MGM is a Zacks Rank #1 (Strong Buy).
Las Vegas Sands
Sticking with the idea of top ranked casino and gambling stocks I have Las Vegas Sands (LVS) up next. While MGM just kicked into profitability, LVS has been there for some time.
The big idea is that LVS just reported its first positive earnings surprise in a year. On May 1, the company reported $0.71 when the Zacks Consensus was calling for $0.66. That five-cent beat translates into a 7.6% positive earnings surprise. Prior to that report, the company had a string of three straight misses.
The better-than-expected earnings sent analysts back to their models looking to increase revenue and earnings estimates. Positive earnings estimates revisions really aren't that new to LVS, and since November of 2012 the Zacks Consensus Estimate has been ticking higher every other month. Starting at $2.61 in November, the consensus edged higher to $2.70 at the end of April. With the recent beat, the estimate now stands at $2.79.
The Zacks Consensus Estimate for 2014 also ticked higher over the same time horizon. Starting at $3.03 in November 2012, the less populated number has since ballooned to $3.20. The implied earnings growth rate stands at 14.7% and for stocks the size of LVS ($48 billion) that is no small achievement.
LVS is a Zacks Rank #2 (Buy).
International Game Tech
The final gamble I am looking at is International Game Tech (IGT) this is more of a supply chain provider to the casino’s but it still fits in the overall scheme of a gambler's stock pick.
IGT has seen three straight positive earnings surprises and has beat the number in four of the last five quarters. That is a goof think, but when we see the size of the last three beats in percentage terms have been 18.8%, 16.7% and 20%, respectively, we have to get excited. Those are solid beats by a company that is followed by 13 to 17 analysts depending on the quarter.
Those beats haven't turned into that much in the way of estimate revisions. Starting in November 2012, the Zacks Consensus Estimate called for $1.23 and since moved higher to $1.31. Nearly the same move for 2014 estimates which moved from $1.28 to $1.33. Despite the solid history of beating the number the analysts are not letting 2014 estimates grow.
My limited experience with casino's tells me that a big portion of the money made comes from the slots, and as a maker of the slots, IGT will always have a place in the gamblers stock picks. The thing to look for is a consistent replacement rate on the slots, and that will be an indication that the company could be set to see higher revenues.
Brian Bolan is a Stock Strategist for Zacks.com.
The information supplied above by Zacks Investment Research Inc. contains opinions based on factual research which may or may not be accurate. Neither Zacks nor Intellisphere will assume any liability for losses from investment decisions based on this information.
The information contained in this article should not be construed as investment advice or as a solicitation to buy or sell any stock. Nothing published by Physician’s Money Digest should be considered personalized investment advice. Physician’s Money Digest, its writers and editors, and Intellisphere LLC and its employees are not responsible for errors and/or omissions.