Key Takeaways From Las Vegas Sands’ Q4 Earnings

by Trefis Team
Las Vegas Sands
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Las Vegas Sands (NYSE: LVS) reported weaker than expected Q4 results on January 23, ending 2018 on a low note. Below par performances from its Singapore and domestic casinos slightly dampened its Q4 results. As a result, the casino giant missed both its earnings and revenue estimates for Q4.  Despite the slowdowns, revenues in the quarter came in just under 3% higher than the year ago period, while adjusted earnings per share came in at 77 cents (vs. 88 cents in Q4’18). A major chunk of its revenue growth came from Macau – across most of its properties, largely driven by solid growth in both gaming and non-gaming divisions. Macau revenue was up nearly 10% year-on-year to $2.26 billion, forming nearly 65% of the company’s net revenues. However, Singapore revenue fell by about 12% year-on-year to $726 million, as a result of a significant fall in the VIP market – owing to capacity constraints. Further, domestic casino revenue fell by just over 3% y-o-y, as a result of below-par casino visitations at its Vegas property and Sands Bethlehem casino. Below, we provide a brief overview of the company’s results and what lies ahead.

Our price estimate for Las Vegas Sands stands at $85, which is now significantly higher than the market price. We are in the process of updating our model based on the guidance provided. We have also created an interactive dashboard – which outlines what to expect from LVS in 2019. You can modify the key value drivers to see how they impact the company’s revenues and bottom line. Below we discuss some of the key factors that are likely to impact the brokerage’s earnings.

Macau continued its robust performance into Q4, largely driven by solid growth in gross gaming revenues (GGR) during the holiday season. As a result, the GGR grew by just about 9% y-o-y this quarter, highlighting solid VIP and Mass visitations. In 2018, LVS’ Macau properties grew by 17% in GGR, outperforming the industry by nearly 300 basis points. Further, the GGR in the region grew consistently for the 29th straight month in December 2018. Additionally, LVS also benefitted from the opening of the Hong Kong-Macau bridge. As a result, the company reported strong VIP and mass market growth across most of its Macau properties. Moreover, we expect significant medium term opportunity in the mass market segment as the bridge provides a direct connection between the Hong Kong airport and Macau. As a result of the improved outlook of the casino market in Macau, we expect another strong year for LVS in Macau driven by growing outbound travel, spending growth, and its strong presence in the region. In addition, its diversified offerings in the Cotai strip should further boost this segment. However, the ongoing trade war and economic slowdown in China should slightly dampen the 2019 outlook.
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