Earnings preview: What to expect from the Crown Resorts FY 2020 result

This earnings season is set to be dominated by companies talking about the impact the pandemic has had on their performances.

While the overall impact varies company to company, one of the companies which is likely to have been hit hardest is Crown Resorts Ltd (ASX: CWN).

It is no wonder then that the casino and resorts operator’s shares are down 30% from their 52-week high.

Ahead of its results release on 19 August 2020, I thought I would see what analysts were expecting from the company.

What to expect from Crown Resorts in FY 2020?

According to a note out of Goldman Sachs, its analysts expect Crown to report a sharp decline in both revenue and earnings.

For the 12 months ended 30 June 2020, Goldman is forecasting revenue of $2.24 billion. This represents a 28% decline on the prior corresponding period.

In respect to earnings, the broker is estimating earnings before interest, tax, depreciation, and amortisation (EBITDA) of $483 million for FY 2020. This will be a 40% decline on the prior corresponding period. On a normalised basis, which excludes one-offs, EBITDA is expected to be $510 million.

Finally, on the bottom line, Goldman Sachs has pencilled in a second half loss of $36 million, leading to full year net profit after tax of $148 million. This will be down 60% year on year. In light of this tough second half, no final dividend is expected to be declared.

What else should you look out for?

Given the uncertainty it is facing, guidance for FY 2021 appears very unlikely to be given with these results.

Nevertheless, the broker is looking for some commentary around costs and also domestic gaming trends during the first quarter. Particularly given the recent reopening of its casino in Perth.

In addition to this, Goldman expects Crown to provide an update on its Crown Sydney development, which is expected to complete at the end of the year.

The broker commented: “Construction of Crown Sydney has largely remained uninterrupted through the pandemic, and CWN continues to expect the Crown Sydney to be completed on time (Dec 2020) and on budget (gross/net cost of A$2.2/1.4bn). Given the importance and size of this asset, we expect investors to focus on i) the outlook and how it plans to navigate around travel restrictions given its clear focus on VIP/premium end of the market and ii) progress and timing around the recruitment of c. 2k FTE to work in the Hotel Resort.”

Should you invest?

Goldman Sachs is sitting on the fence with Crown and has a neutral rating and $9.50 price target on its shares. It prefers rival Star Entertainment Group Ltd (ASX: SGR), which it has placed a buy rating and $3.70 price target on.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Crown Resorts Limited. 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. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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