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The Q1 earnings season has begun on an encouraging note with multiple companies reporting better-than-expected earnings with each passing day. In fact, the S&P 500 companies are likely to witness highest quarterly earnings growth rate in seven years.
Per the latest Earnings Outlook, earnings of the S&P 500 members are expected to increase 18.3% and revenues projected to rise 7.7%. With earnings season still at the nascent stage, in this article we will focus on the performance of casino stocks.
Despite the recent market volatility, the U.S gambling industry has rallied 22.5% in the past year, outpacing the S&P 500’s gain of 12.2%. Within the gaming space, the casino market, which is considered one of the largest entertainment markets in the world, is positioned for substantial growth over the long haul.
The bullish trend in gambling industry is expected to continue through 2018 and beyond. According to Research and Markets, the global casino gaming market is anticipated to witness a CAGR of 10.16% in the 2017-2021 period. The stellar rally of casino stocks on the bourses has been supported by strength in domestic market, turnaround in Macau business and overall international interest in gaming space.
Further, lenient government regulations with respect to online casinos have led to a rapid rise of casino operators. Online gambling has been a primary growth driver for the market as a wide range of customers has gained access to such portals. In fact, the scope for the gambling industry has widened as more than 80 countries have legalized online gambling. Europe is considered the world’s largest online gambling market.
Leading casino companies are optimistic about improving tourism in Las Vegas and increasing demand for gaming and leisure. Therefore, they are opting for alternative avenues to expand customer base and business. Additionally, these casinos operators are increasingly making associations with the hospitality sector, setting up luxury hotels and taking initiatives toward improvement of the gaming businesses. Since these non-gaming services generate higher margins, companies are increasingly focusing on alternative streams to drive revenues.
High Expectations From Q1 Earnings Season
Of the 16 Zacks sectors, 14 are anticipated to report earnings growth in Q1. Gaming stocks, which is a part of the Consumer Discretionary sector seems to have a solid footing as well. The total earnings of the sector are expected to increase 7.2% while revenues are estimated to improve 6.8%. Margins in the quarter are expected to be flat year over year, following a 0.4% decline in the fourth quarter 2017.