Melco Resorts & Entertainment Limited (NASDAQ:MLCO) last week reported its latest quarterly results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Revenues of US$213m came in a modest 6.9% below forecasts. Statutory losses were a relative bright spot though, with a per-share loss of US$0.69 coming in a substantial 47% smaller than what the analysts had expected. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the consensus forecast from Melco Resorts & Entertainment's 16 analysts is for revenues of US$4.79b in 2021, which would reflect a huge 81% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Melco Resorts & Entertainment forecast to report a statutory profit of US$0.33 per share. In the lead-up to this report, the analysts had been modelling revenues of US$4.79b and earnings per share (EPS) of US$0.28 in 2021. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the nice increase in earnings per share expectations following these results.
The consensus price target was unchanged at US$21.21, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Melco Resorts & Entertainment analyst has a price target of US$30.00 per share, while the most pessimistic values it at US$10.40. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Melco Resorts & Entertainment's rate of growth is expected to accelerate meaningfully, with the forecast 81% revenue growth noticeably faster than its historical growth of 2.2%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 22% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Melco Resorts & Entertainment to grow faster than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Melco Resorts & Entertainment's earnings potential next year. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. The consensus price target held steady at US$21.21, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Melco Resorts & Entertainment analysts - going out to 2024, and you can see them free on our platform here.
You still need to take note of risks, for example - Melco Resorts & Entertainment has 2 warning signs (and 1 which can't be ignored) we think you should know about.
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