Melco Resorts (MLCO) To Report Q4 Earnings: What's In Store?

Melco Resorts & Entertainment Limited (NASDAQ:MLCO) is scheduled to report fourth-quarter 2017 results on Feb 8, before the opening bell.

The company has a Zacks Rank #3 (Hold) and an Earnings ESP of 0.00%, a combination that makes surprise prediction difficult. This is because, per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 to beat estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

We don’t recommend Sell-rated stocks (Zacks Rank #4 or #5) going into the earnings announcement.

Melco’ssurprise history has been impressive as the company beat estimates in three of the last four quarters with an average positive beat of 61.20%. Notably, the Zacks Consensus Estimate for the to-be-reported quarter’s earnings is pegged at 23 cents, reflecting an increase of 76.9% over the prior-year quarter. Also, revenues are expected to improve 11.1% year over year to $1.33 billion.

A look at the company’s price performance also reveals that it outperformed the industry over the last year. Shares gained a massive 68.9% compared with the industry’s growth of 35.2%.

A Quick Recap of Q3 Performance

Melco’s third-quarter earnings and revenues beat the Zacks Consensus Estimate.

Both earnings and revenues grew significantly year over year. Top-line improvement was primarily driven by higher rolling chip revenues at City of Dreams

What We Are Watching

Per Macau’s Gaming Inspection and Coordination Bureau (“DICJ”), gross gaming revenues (GGR) rose year over year in all the three months of the quarter. This, in turn, indicates that the casino hub is firmly on road to recovery. Notably, Macau’s VIP’s share of overall casino market in the fourth quarter was reportedly 56.2%. We thus expect Melco’s performance in the region to get a boost in the to-be-reported quarter.

Melco Resorts & Entertainment Limited Revenue (TTM)

Increased focus on non-gaming segments like rooms and food and beverages are further expected to drive the quarter’s results. Notably, the company’s large-scale resorts provide distinctive lodging, entertainment and retail options, which appeals to a broader audience from around the region.

Additionally, Melco Resorts’ cost-control efforts including effective management of marketing expenses are likely to drive fourth-quarter profits and margins. The addition of VIP tables at the company’s Studio City property is also aiding it to deliver a broader product offering to a wider breadth of customers. This, in turn, is expected to lead to higher profits in the quarter.

The Philippines gaming industry is being supported by the country's robust economic growth and its expanding inbound tourism strategy. City of Dreams, Manila continues to deliver year-on-year growth across all gaming segments in the Philippines, Thus, Melco’s Entertainment City property therein is poised to largely benefit from this growth.

However, stringent capital controls by the Chinese government and increased audits of the junket industry by DICJ in order to stop money laundering might have somewhat restricted gaming revenues in Macau. This may weigh on the company’s quarterly results as well.

Stocks That Warrant a Look

Here are some stocks that you may want to consider as our model shows these have the right combination of elements to deliver a positive earnings surprise:

Penn National Gaming (NASDAQ:PENN) has an Earnings ESP of +3.45% and a Zacks Rank #1 (Strong Buy). The company is slated to report its quarterly numbers on Feb 8. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cheesecake Factory (NASDAQ:CAKE) has an Earnings ESP of +0.17% and a Zacks Rank #2. The company is scheduled to report its quarterly numbers on Feb 21.

Fogo de Chao (NASDAQ:FOGO) has an Earnings ESP of +5.63% and a Zacks Rank #3. The company is expected to release its quarterly numbers on Mar 13.

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