By Dan Burrows

Top international casino stocks came up snake eyes in the wake of recent first-quarter earnings reports -- even though their results beat Wall Street expectations handily.

The wider market selloff is no doubt partly to blame -- risk aversion is unkind to economically sensitive cyclical sectors like gambling stocks. But it's also the case that while results from Macau continue to go gangbusters, the picture in Las Vegas remains somewhat mixed.

The question now for investors in the major China and Las Vegas casino companies: Do you double down on weakness, or hold out for better entry points in anticipation of year-end seasonal strength?

Melco Crown Entertainment (MPEL), the only U.S.-listed company that's focused exclusively on China, is the latest casino stock to report earnings, and like the competition, it showed that business in Macau remains robust despite the slowing Chinese economy.

Melco on Wednesday squeaked past Wall Street's top-line forecast and beat the bottom-line estimate by a solid 5 cents a share. Net income ballooned to $122.1 million from $7.2 million in last year's first quarter, helped by mass market table games (a higher margin business) and -- importantly -- lower costs.

Shares sold off Wednesday, but that's probably more due to the generalized market malaise. Looking farther out, Melco offers a pure play on China's explosive growth, and that's a potentially lucrative bet. Gambling revenue in Macau, by far the world's biggest casino gambling center, jumped more than 24% at the end of the first quarter, according to government figures. Meanwhile, Melco's flagship City of Dreams property continues to ramp up, notes Haitong analyst Donald Cheng Kwok Keung, and its Macau Studio City project stands ready to be the next growth catalyst.

Shares still might get cheaper, if only because the market is selling off amid the European debt crisis, but the valuation is attractive at current levels. The stock is trading at a 60% discount to its own five-year average on a forward earnings basis, according to data from Thomson Reuters Stock Reports.

Wynn Resorts (WYNN) is another chance to buy casinos on weakness. Shares are off more than 7% since the company missed Wall Street's top- and bottom-line estimates late Monday.

Wynn's revenue from its Macau operations was strong, climbing 9.8%, but weakness in table games caused Las Vegas revenue to slump 8.1%.

The Vegas news spooked investors, but they should have seen it coming, noted Credit Suisse analysts, who said the sluggishness there was expected. With all the uncertainty surrounding the state of the consumer, it's hard to say how Vegas will fare in the summer season -- much less farther out into year's end -- but the trend has been one of incremental improvement. Business in Sin City is indeed stabilizing. Visitor volume is forecast to hit an all-time record high this year, according to Moody's Investors Service.

"After suffering through a deep trough during the recession when visitor volume declined as new capacity came online, the Las Vegas recovery is under way," Peggy Holloway, a Moody's senior credit officer, said in a statement. "Hotels are benefiting from increased visitor numbers that permit higher room rates, while gaming revenues are recovering, albeit more slowly."

Additionally, a new terminal opening at McCarran Airport should funnel more international flights to Vegas this summer. It's also reassuring that Nevada's latest monthly gambling revenue shows signs of a healthy rebound. Total revenue hit $932.2 million in February, the latest date for which figures are available, according to state figures. That's up from $881.8 million a year ago, although still well below the pre-crisis peak of $1.05 billion notched in 2007.

With strength in Macau and Vegas on the mend, the selloff in Wynn might be overdone: Shares currently trade at a 57% discount to their own five-year average on a forward earnings basis.

Las Vegas Sands (LVS), the biggest casino operator on the market, had a blowout record quarter when it reported in late April, but that hasn't kept its stock from falling prey to the general downdraft in equities.

Strong growth and margins in Macau, Singapore and the U.S. helped Las Vegas Sands beat Wall Street's earnings forecast by a whopping 12 cents a share. And, unlike competitor Wynn Resorts, domestic operations were on a roll in the quarter: Revenue from the company's Las Vegas casinos spiked 91% year-over-year.

On the downside in Vegas, revenue per available room -- a key hotel industry measure -- was flat year-over-year even as city-wide room revenue grew. That indicates Las Vegas Sands lost market share or the weak convention calendar hurt room revenue in March, notes Ryan Worst, an analyst at Brean Murray, Carret & Co.

Still, Vegas results were solid, the analyst said, and the opening of its Cotai Central property in early April should reinvigorate growth in Macau.

Las Vegas Sands has exceeded analysts' average bottom- and top-line estimates for four quarters in a row, and its diversity of properties in Macau, Singapore and the U.S. -- with plans for a huge EuroVegas resort in Spain -- make it perhaps best in breed. Like their competitors, LVS shares appear to offer compelling value at current levels, trading at a 59% discount to their own five-year average on a forward earnings basis.

Although these companies are getting hammered in the wider market selloff, first-quarter results indicate that farther out, the fundamentals appear solid for the top international gambling stocks. Macau shows no sign of letting up even as the Chinese economy eases, and Las Vegas, though mixed and challenging, is gradually -- if fitfully -- on the mend.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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