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This story originally appeared on StockNews
After almost 11 months, an argument can now be made that the COVID-19 pandemic is finally in retreat in the United States. According to a CNBC analysis of Johns Hopkins University data, new daily average cases have plunged in 43 states. This is good news for the country in general and for the gambling industry in particular. As increasing numbers of people begin to feel safe to visit brick-and-mortar casinos, the industry will see revenue growth.
Like most industries, the gaming and gambling industry was hit hard last year. However, because casinos are gradually reopening this year, a huge pent-up demand for gambling should boost the sales of gambling services and related goods significantly. Because people are desperate to escape their homes, hungry for entertainment and fun after a nearly one-year-long lockdown, gambling and gaming businesses are expected to thrive.
Against this backdrop, gambling stocks Boyd Gaming Corporation (BYD – Get Rating), International Game Technology PLC (IGT – Get Rating), and Red Rock Resorts, Inc. (RRR – Get Rating) appear to be promising plays on the industry’s rebound. We think their efficient operating models should help them generate massive profits in the months to come.
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1. Boyd Gaming Corporation (BYD – Get Rating)
Headquartered in Las Vegas, Nevada, BYD is a multi-jurisdictional gaming company that operates through three segments – Las Vegas Locals, Downtown Las Vegas, and Midwest & South. As of last October, it operated 29 gaming entertainment properties located in Nevada, Illinois, Indiana and other states.
This month, BYD and Aristocrat Technologies launched BYD’s new digital wallet product – BoydPay. This partnership is expected to help BYD create a unique and seamless payment experience for its customers and drive business growth.
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Last year, BYD and FanDuel Group debuted the FanDuel Par-A-Dice Sportsbook in the state of Illinois. BYD expects the FanDuel Par-A-Dice Sportsbook to quickly become Illinois sports bettors’ mobile app of choice as it continues to expand its mobile and retail offerings.
BYD’S other segment’s revenue has increased 35.2% year-over-year to $57.4 million in the fourth quarter ended December 31, 2020. Its net income grew 242.8% from its year-ago value to $83.29 million, while its EPS increased 247.6% year-over-year to $0.73. The company’s adjusted EBITDAR under the Midwest & South segment rose 1.3% from its prior-year quarter to $159.46 million.
A consensus EPS estimate of $0.49 for the next quarter, ending June 30, 2021, indicates a 150% improvement year-over-year. Also, BYD beat the Street’s EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $678.5 million for the next quarter represents a 419% increase from the same period last year. The stock has gained 69.4% over the past year.
BYD’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
BYD has a B grade for Growth and Quality. Within the Entertainment – Casinos/Gambling industry, it is ranked #2 of 23 stocks.
In addition to the POWR Ratings grades I’ve just highlighted, you can see the BYD ratings for Stability, Momentum, Value and Sentiment.
2. International Game Technology PLC (IGT – Get Rating)
Founded in 2014, IGT offers gaming technology products and services worldwide. It operates through four segments: North America Gaming and Interactive, North America Lottery, International, and Italy. The company also provides online lottery transaction processing systems and sports betting services.
This month IGT announced that it plans to its Las Vegas Strip property to a state-of-the-art IGT ADVANTAGE Casino Management System. This move is designed to enhance guest experience and patron loyalty. It should also ensure long-term capacity for future growth.
Also, this month, IGT México Lottery extended its partnership with La Lotería Nacional para la Asistencia Pública, Mexico’s national lottery, to continue delivery of its draw-based and instant tickets system. The partnership is helping IGT provide innovative and reliable services to its customers.
IGT’s global lottery revenue increased 3% year-over-year to $570 million in the third quarter ended September 30, 2020. Its operating income under its international lottery segment grew 22% from its year-ago value to $196 million, while its adjusted EBITDA rose 14% year-over-year to $309 million over the period. Its net cash provided by operating activities increased 44.8% from the prior-year quarter to $285.21 million.
A consensus EPS estimate of $0.78 for fiscal 2021 represents a 1,075% improvement year-over-year. IGT has an impressive earnings surprise history, with the company beating consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $4.05 billion for the current year represents a 15.4% increase from the same period last year. The stock has gained 28.2% over the past year.
It is no surprise that IGT has an overall rating of B, which equates to Buy in our POWR Ratings system. IGT has a Bgrade for Growth and Value. In the same industry, the stock is ranked #5.
To see additional POWR Ratings for Stability, Sentiment, Momentum, and Quality for IGT, click here.
3. Red Rock Resorts, Inc. (RRR – Get Rating)
Based in Las Vegas, Nevada, RRR is engaged in casino entertainment and gaming and entertainment businesses in the United States. The company operates through Las Vegas Operations and Native American Management. It owns and operates 10 gaming and entertainment facilities and 10 smaller casinos in the Las Vegas regional market.
Last month, the company issued a notice of partial redemption of the senior notes due 2025. RRR plans to redeem $250 million of senior notes with cash on hand. RRR’s operating revenue under its management fees segment has increased 21% year-over-year to $25.78 million in the fourth quarter ended December 31, 2020. Its net income increased 515.2% from its year-ago value to $29.71 million, while its EPS rose 500% year-over-year to $0.42. The company’s adjusted EBITDA grew 9.4% from the prior-year quarter to $150.54 million.
A consensus EPS estimate of $0.89 for 2021 represents a 141.8% improvement year-over-year. RRR has an impressive earnings surprise history, with the company beating consensus EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $1.35 billion for the current year represents a 14.4% increase from the same period last year. The stock has gained 9.3% over the past year.
RRR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our POWR Ratings system. RRR has a B grade for both Growth and Quality. In the same industry, the stock is ranked #7.
In total, we rate RRR on eight different levels. Beyond what we’ve stated above we have also given RRR grades for Momentum, Value, Sentiment, and Stability. Get all the RRR ratings here.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.