What to Expect When Melco Crown Reports

Heading into earnings, some investors are probably wondering what to do with shares of Melco Crown. After rivals like Las Vegas Sands and Wynn Resorts posted better-than-anticipated results, can Melco keep up the trend? Or will its release show signs that the company's future is in doubt?

May 7, 2014 at 5:30PM


Source: Melco Crown

May 8, 2014 is bound to be a big day for investors owning shares in Melco Crown Entertainment (NASDAQ:MPEL). Before the market opens, Melco Crown's management team is due to report the company's earnings for the first quarter of its 2014 fiscal year. After seeing rivals like Las Vegas Sands (NYSE:LVS) and Wynn Resorts (NASDAQ:WYNN) beat analyst expectations in their own recent earnings releases, can the company follow suit and show continued signs of long-term growth? 

Mr. Market's high expectations
For the quarter, analysts expect Melco Crown to report revenue of $1.36 billion. If this forecast turns out to be accurate, it will mean that the company's sales have grown 19% year over year. While this may seem like an unlikely increase in sales given how large the company is, competitors have done quite well during the first quarter.

Las Vegas Sands, the largest of the three casino operators, reported a 21.5% jump in sales for the quarter, from $3.3 billion to $4 billion, as its large exposure to Macau's economy propelled revenue higher. Wynn Resorts also did well for the quarter, seeing revenue climb 9% from $1.38 billion last year to $1.51 billion this year. This increase in sales for the casino operator came from a 14% jump in sales in its Macau business, partially offset by a decline in domestic sales.


Source: Melco Crown

From an earnings perspective, Mr. Market's hopes for Melco Crown are even bigger. If analysts are correct in their assumptions, the casino should report earnings per share of $0.41, 310% above the $0.10 management reported in the same quarter last year. In part, this increase in profits will likely be due to the higher revenue Mr. Market expects; but it will also be the result of lower operational expenses and the absence of the $50.9 million loss on the extinguishment of debt that the company incurred in the first quarter of 2013.

But how does Melco Crown look over the long run?
While it may be tempting to invest in a company with the hopes that analysts are right and shares will rise, the more important way to look at a company is to analyze how it's performed over an extended period of time. Over the past few years, Melco Crown has demonstrated phenomenal growth. Between 2009 and 2013, the company's revenue soared 282% from $1.3 billion to approximately $5.1 billion, while its net loss of $308.6 million morphed into a gain of $637.5 million.

MPEL Revenue (Annual) Chart

Melco Crown revenue (annual) data by YCharts

This increase in revenue came from the company's exposure to Macau, a booming market for casinos. In the first four months of 2014, the industry's gross revenue soared 17.5% to $16.7 billion from the $14.2 billion it enjoyed through April 2013. Moving forward, Melco Crown will cease to be a pure play on the region, as management has decided to open City of Dreams Manila, a resort in the Philippines that will market the business' first foray into international locations.


Source: Gaming Inspection and Coordination for Macau

This meteoric rise in revenue and net income is impressive, even when placed next to its peers. Over the same time frame, Las Vegas Sands saw its revenue jump 202% from $4.56 billion to $13.77 billion, while its net income grew from a loss of $354.5 million to a gain of $2.3 billion.

Although not bad by any means, Wynn Resorts' revenue rose a more modest 85% from $3.05 billion to $5.62 billion, while net income increased 3,420% from $20.7 million to $728.7 million. Like Melco Crown, both Las Vegas Sands and Wynn Resorts have a substantial (and growing) footprint in Macau.

Foolish takeaway
Based on analyst estimates, it looks like shareholders expect a lot from Melco Crown. Using the company's historical data and the fact that other big players in the market have done quite well for themselves, it's not unreasonable to expect a nice uptick in revenue and earnings, but nothing's certain.

For the Foolish investor, the smartest way to play the situation is to assess Melco Crown's long-term results and make an investment decision from those findings. Of the three, the company has done far better than its rivals, especially Wynn Resorts. While this doesn't mean that management can continue this trend, it does suggest that the company should prove to be an interesting and potentially profitable prospect for market participants.

The biggest thing to come out of Silicon Valley in years
If you thought gambling from a casino or from your home computer was fun, just wait for this next big trend. With Apple on its way to creating a new device of YOU, is it possible that physical casinos as well as other property-based businesses could become obsolete?

If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now... for just a fraction of the price of AAPL stock. Click here to get the full story in this eye-opening new report.

Daniel Jones has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers