It's been a tumultuous, Twitter-hacked, earnings-filled week, yet the market continues to chug higher. For skeptics like me, that's an opportunity to see whether companies have earned their current valuations.
Keep in mind that some companies�deserve�their current valuations. Take casino and hotel operator Las Vegas Sands (NYSE: LVS ) , for example, which is approaching a new 52-week high on the heels of strength in its Macau business. Targeting a broader class of Chinese citizens and tourists, Las Vegas Sands has supplanted Wynn Resorts�in growth and is putting itself atop the casino sector.
Still, other companies might deserve a kick in the pants. Here's a look at three companies that could be worth selling.
Boring doesn't always mean "buy"
You may have heard me mention recently that boring industries can often make the most profitable industries. That is generally true, but it's not a rule! This is why packaging products maker Rock-Tenn (NYSE: RKT ) has found its way onto my "sell-now" radar.
Top Casino Companies To Own For 2014: Pinnacle Entertainment Inc.(PNK)
Pinnacle Entertainment, Inc. owns, develops, and operates casinos, and related hospitality and entertainment facilities in the United States. It operates casinos, such as L'Auberge du Lac in Lake Charles, Louisiana; River City Casino and Lumiere Place in St. Louis, Missouri; Boomtown New Orleans in New Orleans, Louisiana; Belterra Casino Resort in Vevay, Indiana; Boomtown Bossier City in Bossier City, Louisiana; and Boomtown Reno in Reno, Nevada. The company also operates River Downs racetrack in southeast Cincinnati, Ohio. As of May 26, 2011, it operated seven casinos and one racetrack. The company was formerly known as Hollywood Park, Inc. and changed its name to Pinnacle Entertainment, Inc. in February 2000. Pinnacle Entertainment, Inc. was founded in 1935 and is based in Las Vegas, Nevada.
Advisors' Opinion:- [By Jeanine Poggi]
Pinnacle Entertainment(PNK) was the great transition story of 2010, with shares spiking about 45% this year.
The regional casino operator's most impressive story has been in its gross margins, as management, under the leadership of new CEO Anthony Sanfilippo, is in the process of increasing the company's operating efficiencies and prudently allocating capital. Analysts believe Pinnacle is in the early stages of this process, and will continue to drive revenue growth.
In its third quarter, Pinnacle reported a surprise profit of 10 cents a share on an adjusted basis, better than consensus estimates of a loss of 7 cents. Revenue grew 15% to $287.8 million, while property-level margins reached 23.4%, also ahead of forecasts.
Last month, Pinnacle purchased Cincinnati's River Downs Racetrack for $45 million. The deal includes 155 acres, 35 of which are still undeveloped. The transaction is expected to close by the end of the first quarter of 2011.
This deal could generate significant returns in the event that Ohio decides to legalize video lottery terminals at racetracks, Santarelli said.
Pinnacle is also in the process of looking for a buyer of its oceanfront land in Atlantic City, where it originally intended to build a $1.5 billion casino, before squelching plans. The casino operator bought the land in 2006 for $270 million from groups affiliated with Carl Icahn and later added another piece of land for $70 million.
While the land's currently value is $38 million, Pinnacle insists it will not sell it on the cheap, holding out for the best deal.
Pinnacle currently has $228 million in cash and $375 million of availability under its revolver.
Top Casino Companies To Own For 2014: MGM Resorts International(MGM)
MGM Resorts International, through its subsidiaries, primarily owns and operates casino resorts in the United States. The company?s resorts offer gaming, hotel, dining, entertainment, retail, and other resort amenities. It also owns and operates golf courses and a golf club. As of December 31, 2010, the company owned and operated 15 properties located in Nevada, Mississippi, and Michigan; and has 50% investments in 4 other casino resorts in Nevada, Illinois, and Macau. In addition, MGM Resorts International has an agreement with the Mashantucket Pequot Tribal Nation, which owns and operates a casino resort in Connecticut, to carry the ?MGM Grand? brand name. The company was formerly known as MGM MIRAGE and changed its name to MGM Resorts International in June 2010. MGM Resorts International was founded in 1986 and is based in Las Vegas, Nevada.
Advisors' Opinion:- [By Hawkinvest]
MGM Resorts International (MGM) is one of the world's largest hotel and casino companies, based in Las Vegas. Since December, MGM shares have been trading in a range of about $9, to almost $15 per share. The stock is now at the upper limit of the recent trading range which means that the risk of holding or buying this stock right now, could be elevated. MGM shares have rallied with the markets but appear extended and vulnerable to a sell-off. The company has a heavy debt load and it has been reporting losses. The balance sheet has about $13.45 billion in debt and only about $1.97 billion in cash. MGM could be impacted by higher oil prices because many consumers could cut back on spending if they go to Las Vegas, and some might decide not to go at all, and instead opt for a "staycation." With MGM facing challenges and the shares near recent highs, it could make sen se to sell now and buy on dips later this year.
Here are some key points for MGM:
Current share price: $14.18
The 52 week range is $7.40 to $16.05
Earnings estimates for 2011: a loss of 53 cents per share
Earnings estimates for 2012: a loss of 39 cents per share
Annual dividend: none
Best Stocks To Buy: Penn National Gaming Inc.(PENN)
Penn National Gaming, Inc. and its subsidiaries own and manage gaming and pari-mutuel properties in the United States. It operates approximately 27,000 gaming machines; 500 table games; and 2,000 hotel rooms in 23 facilities in 16 jurisdictions, including Colorado, Florida, Illinois, Indiana, Iowa, Louisiana, Maine, Maryland, Mississippi, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, West Virginia, and Ontario. The company was formerly known as PNRC Corp. and changed its name to Penn National Gaming, Inc. in 1994. Penn National Gaming, Inc. was founded in 1982 and is based in Wyomissing, Pennsylvania.
Advisors' Opinion:- [By Quickel]
Penn National Gaming(PENN) squeaked past its guidance through improved cost controls, and investors praised its efforts.
But expectations were low, and its upbeat outlook shouldn't be viewed as a message that regional markets are recovering. "Going forward, we project soft regional gaming revenue results over the next three to six months, as we do not expect to see a significant increase in consumer spending patterns given the uncertain economic environment," J.P. Morgan analyst Joseph Greff wrote in a note.
Penn National raised its full-year earnings guidance to $1.18 from $1.13 a share, and up its revenue outlook by $26 million to $2.44 billion from $2.41 billion.
During the second quarter, the company earned $9.2 million, or 9 cents a share, compared with $28.5 million, or 27 cents, in the year-ago period. Excluding items, Penn actually earned 29 cents a share, a penny higher than estimates.
Revenue rose 3% to $598.3 million, higher than the $597.1 million Wall Street projected. The upside was driven by both better revenues and margins and was generally broad-based across many properties, especially larger venues in Charlestown, Lawrenceburg and Grantville, Pa.
Penn National rolled out table games in West Virginia and Pennsylvania during the quarter, which should be a growth catalyst moving forward. The company also plans to open a slot facility in Maryland on Sept. 30 and expects its Toldeo, Ohio, location to open in the first-half of 2012. Its Columbus project is slated to open in the second-half of 2012.
The company repurchased 409,000 shares during the quarter. "[This] sends a message to investors on the value of its equity, but perhaps indicating the lack of near-term acquisition opportunities," J.P. Morgan analyst Joseph Greff wrote in a note.
Top Casino Companies To Own For 2014: Wynn Resorts Limited(WYNN)
Wynn Resorts, Limited, together with its subsidiaries, engages in the development, ownership, and operation of destination casino resorts. The company owns and operates Wynn Las Vegas casino resort in Las Vegas, which includes approximately 22 food and beverage outlets comprising 5 dining restaurants; 2 nightclubs; 1 spa and salon; 1 Ferrari and Maserati automobile dealership; wedding chapels; an 18-hole golf course; meeting space; and foot retail promenade featuring boutiques. Wynn Las Vegas casino resort also features approximately 147 table games, 1 baccarat salon, private VIP gaming rooms, 1 poker room, 1,842 slot machines, and 1 race and sports book. It also owns and operates an Encore at Wynn Las Vegas resort, a destination casino resort located adjacent to Wynn Las Vegas that features a 2,034 all-suite hotel, as well as a casino with 95 table games, 1 sky casino, 1 baccarat salon, private VIP gaming rooms, and 778 slot machines. In addition, the company operates Wyn n Macau casino resort located in the Macau Special Administrative Region of the People?s Republic of China. Wynn Macau casino resort features approximately 595 hotel rooms and suites, 410 table games, 935 slot machines, 1 poker room, 1 sky casino, 6 restaurants, 1 spa and salon, lounges, meeting facilities, and retail space featuring boutiques. Further, it operates Encore at Wynn Macau resort located adjacent to Wynn Macau. Encore at Wynn Macau resort features approximately 410 luxury suites and 4 villas, as well as casino gaming space, including a sky casino consisting of 60 table games and 80 slot machines, 2 restaurants, 1 luxury spa, and retail space. The company was founded in 2002 and is based in Las Vegas, Nevada.
Advisors' Opinion:- [By Jonas Elmerraji]
While gamblers in Las Vegas are focused on the payouts on the casino floor at Wynn Resorts (WYNN), I'm more interested in this stock's dividend payout -- there's no gamble there. The $14 billion casino resort operator currently pays out a $1 per share dividend each quarter, adding up to a 2.8% dividend yield at current price levels.
Wynn has benefitted from a rebounding economy in Las Vegas. The firm's Wynn and Encore resorts are two of the newer properties on the strip, and their high-end positioning keeps VIP business coming into the door. Vegas, though, isn't Wynn's cash cow anymore. China is. Today, around 70% of revenues actually come from Macau, the high-end Chinese gambling district. Macau is Wynn's crown jewel in large part because the firm is one of the few that's been granted a gaming license from the government: Wynn has two properties in Macau, with a third on the way.
Healthy levels of profitability have translated into a $2.2 billion cash position for WYNN -- enough to pay for around 15% of the firm's market capitalization. Concentrated ownership from founder Steve Wynn should align management's incentives with investors, and increase the likelihood of a dividend hike.
- [By Jeanine Poggi]
Wynn Resorts'(WYNN) run up of more than 55% this year has caused Wall Street to question its valuation.
Currently, eight analysts have a buy rating on Wynn, 16 say hold, two rate it underperform rating and one says to sell the stock.
"With little on the growth horizon in the intermediate term, new competition from Cotai coming in 2011 and 2012 ... and the unclear timing of a true recovery in Las Vegas, we see few catalysts not yet priced-in to pull valuation higher than current levels," Bain wrote in a note following its third-quarter earnings report.
During the quarter, Wynn lost $33.5 million, or 27 cents a share, compared with a profit of $34.2 million, or 28 cents, in the year-ago period. The loss was attributed to charges related to servicing its debt. On an adjusted basis, Wynn actually earned 39 cents, matching Wall Street's outlook.
Total Revenue grew to $1 billion from $773.1 million, better than the $990.8 million analysts predicted.
In Macau, Wynn reported a 50% surge in revenue to $671.4 million, while EBITDA was $198 million, up 54.5% from $128.2 million in the third quarter of 2009. Earlier in the year the company opened its $600 million Wynn Encore Macau, which added 414 rooms to the market.
Looking ahead, Wynn expects to break ground on its Cotai development in early 2011. The $2 billion to $3 billion project is slated to open in 2015, and management said it would provide additional details following its fourth-quarter earnings report.
In Las Vegas, CEO Steve Wynn says the Strip is on the road to recovery. "I believe we have seen the bottom in Las Vegas," he said during the company's third-quarter conference call. "I don't know how fast it is going to get better but it isn't going to get any worse."
Las Vegas revenue inched up 3.1% to $334.5 million during the three-month period, and EBITDA grew 9.3% to $76.5 million.
Wynn also issued a cash dividend of $8 a share payable on Dec. 7 to sharehold! ers of record on Nov. 23.
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