Weekly Casino Notes: Las Vegas Sands’ Earnings And More

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The past week was eventful for casino operators as Las Vegas Sands reported a 28% jump in its earnings for the fourth quarter. On a separate note, Union Gaming Research came out with a report stating that the casino stocks have bottomed out. This led to a buying spree in the casino stocks. The Macau data for the week ending January 25th also came in positive with a 7% growth over the previous week. However, it remained 7% lower when compared to the prior year period. On that note, we discuss below some key developments in the casino industry over the past week or so.

Las Vegas Sands

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Las Vegas Sands (NYSE:LVS) recently reported its Q4 2014 earnings. A decline in Macau gaming weighed over the company’s performance and China revenues declined 16% to $2.12 billion. Macau EBITDA also declined 15% to $713 million. Las Vegas Sands’ consolidated revenue decreased 7% to $3.42 billion but earnings per share jumped 28% to $0.92 for the quarter due to lower costs (read more – Las Vegas Sands’ China Operations Decline After A Slowdown In Macau; Earnings Jump 28% Over Lower Costs). We continue to believe that Macau will drive growth for the casino operators in the medium to long run led by mass-market gaming operations. Las Vegas Sands will benefit from its diverse properties in the region, primarily Cotai, which has been growing rapidly and has captured some of the mass-market and VIP gaming share of the peninsula.

We estimate gross revenues of over $19 billion for Las Vegas Sands in 2015, with EPS of $3.96, which is in line with the market consensus of $3.05-$4.03, compiled by Thomson Reuters. We currently have a $74 price estimate for Las Vegas Sands, which will soon update to incorporate the recent quarterly earnings.

Wynn Resorts

Wynn Resorts (NASDAQ:WYNN) will report its fourth quarter earnings on February 3rd. Wynn’s stock price has moved more than 4% this week after the Union Gaming Research in a report stated that the stock prices of casino stocks have bottomed out. Also, the note said that ‘New Macau’ with more scrutiny for VIP gaming is for good and will help the industry at large in the long run. [1] Wynn’s stock price was aided with these positive news flows over the past week. We are eager to learn if Wynn was able to control its costs amid a decline in Macau gaming, which surely will hit the topline of the company in the fourth quarter.

We estimate gross revenues of over $7 billion for Wynn Resorts in 2015, with EPS of $9.05, which is slightly higher than the market consensus of $7.18, compiled by Thomson Reuters. We currently have a $186 price estimate for Wynn Resorts, which we update after the company reports its fourth quarter earnings.

MGM Resorts

Unlike Las Vegas Sands and Wynn Resorts, MGM Resorts (NYSE:MGM) derives majority of its value from its U.S. operations. The company has a wide presence on the Las Vegas Strip and generates a significant portion of its revenues from non-gaming sources. However, Macau is an important play for MGM and accounts for more than 35% of its value. The company will report its fourth quarterly earnings sometime in February and will also face the heat from a slowdown in Macau. It must be noted that gross gaming revenues in Macau fell 25% during the fourth quarter and 3% for the full year, marking the first ever annual revenue decline for Macau. While the company’s stock price jumped towards the beginning of the week, it settled down and remained flat for the week towards end of Thursday.

We estimate gross revenues of about $12 billion for MGM Resorts in 2015, with EPS of $0.68, which is in line with the market consensus of $0.31-$1.0124, compiled by Thomson Reuters. We currently have a $24 price estimate for MGM Resorts, which is more than 15% ahead of the current market price.

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Notes:
  1. Get back in to Macau names: Union Gaming, GGR Asia, January 26, 2015 []