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EARNINGS PREVIEW: U.S. Casinos' Comeback Slows

By Kristin Jones TAKING THE PULSE: Casinos have welcomed back gamblers in the past year after a recessionary slump, but persistent unemployment and languid wages have put pressure on that growth. Moody's Investors Service in June noted that the winning streak in U.S. gambling appeared to be slowing and even reversing. Declining volumes on table games and slot machines sent Nevada's gambling revenue down sharply in May from the previous year, the Nevada Gaming Control Board reported. At the same time, the spectacular growth of gambling in Macau has been moderating in recent months, facing increasingly tough year-over-year comparisons at the same time as China is poised for a slowdown. The area's popularity with Chinese gamblers has been a boon to U.S. casino operators with exposure to the market--and also raised questions for operators like Las Vegas Sands Corp. (LVS) and Wynn Resorts Ltd. (WYNN) about the murky political dealings behind the high-stakes land deals. Last year, Macau earned more than five times the gambling revenue of the Las Vegas Strip. COMPANIES TO WATCH: Wynn Resorts Ltd. (WYNN) -- reports July 17 Wall Street Expectations: Analysts see a per-share profit of $1.51, with $1.34 billion in revenue. A year earlier, Wynn reported a 97-cent per-share profit, or $1.60 excluding property charges and other one-time items, on $1.37 billion in revenue. Key Issues: Like its competitors, Wynn Resorts has seen a bottom-line boost from operations in Macau, though its earnings slipped earlier this year as it kept a smaller cut of revenue from its table games on the Las Vegas Strip. In May, Wynn won land rights for a multibillion-dollar casino resort in Macau, which its chief executive called "the single most important project in the history of Wynn Resorts." Penn National Gaming Inc. (PENN) -- reports July 24 Wall Street Expectations: Analysts surveyed by Thomson Reuters expect per-share earnings of 64 cents on revenue of $722 million. A year earlier, the company reported per-share earnings of 71 cents, or 55 cents excluding write-downs and other items, on revenue of $687.9 million. Key Issues: Penn National's revenue has posted double-digit growth for three of the four most recent quarters as customers return to the U.S. regional casino company's racetracks and casinos. In late May, the company opened Hollywood Casino Toledo, one of Ohio's first two casinos, about a month later than originally anticipated. The opening was seen adding to expenses during the quarter, but advisory firm Janney saw indications of a strong start. Despite signs of growth, Penn remains vulnerable to competition and cannibalization as new markets open to gambling and current markets expand. Caesars Entertainment Corp. (CZR) -- reports Aug. 1 Wall Street Expectations: Analysts see $2.29 billion in revenue. A year earlier, the company posted revenue of $2.23 billion. Key Issues: Caesars, a giant in the industry, hasn't recovered fully from the recession and hasn't posted a profit since late 2009. Revenue generally has followed an upward trend in the past year; the general return of customers to Las Vegas has helped, dragging along less-successful operations in Atlantic City and other spots. In May, its joint-venture casino with Rock Gaming LLC opened a casino in Ohio. But Caesars lacks a casino license in go-go Macau. And the company's heavy debt, and attendant interest expenses, appear likely to keep weighing down earnings in the short term. Looking ahead, Caesars has pushed for the legalization of Internet gambling in the U.S., but the prospects for that remain uncertain. Las Vegas Sands Corp. (LVS) -- reporting date to be announced Wall Street Expectations: Forecasts calls for a 61-cent per-share profit on $2.83 billion in revenue. The company reported a year-earlier profit of 45 cents a share, or 54 cents excluding pre-opening costs and other impacts, as it generated $2.35 billion in revenue. Key Issues: Las Vegas Sands has seen blockbuster growth in recent quarters, driven primarily by its Asia properties. The company now has four casinos in the Chinese gambling enclave of Macau; its newest, Sands Cotai Central, opened in April. J.P. Morgan warned recently that the new property raises the risk of cannibalization among Sands casinos in Macau, and pointed to signs of slowing growth in the market. The casino also dropped its bid to win rights to additional land there, giving up its previous investment of $100 million and thwarting its further expansion plans. The casino's Las Vegas revenue has also been growing, albeit more modestly. MGM Resorts International (MGM) -- reporting date to be announced Wall Street Expectations: Analysts project a loss of 14 cents a share on revenue of $2.35 billion. A year ago, the casino operator reported a $6.22 per-share profit, including a special gain of $6.27 a share, and net revenue of $1.81 billion. Key Issues: MGM's properties on the Las Vegas Strip and its operations in booming Macau have led to double-digit revenue growth for the past year. It also has stemmed the bleeding from its CityCenter joint venture in Las Vegas, delivering stronger revenue in recent quarters. But the casino operator has reported just one quarter in the black, of the past 12, as it struggles to pay down heavy debt. (The Thomson Reuters financial estimates and year-earlier figures may not be comparable due to one-time items and other adjustments.) Write to Kristin Jones at kristin.jones@dowjones.com

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