Las Vegas Sands Earnings: Macau Results, Outlook Will Set The Stage, as Usual

Posted on: October 22, 2019, 11:49h. 

Last updated on: October 22, 2019, 12:27h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Las Vegas Sands Corp. (NYSE:LVS), the operator of five casinos in Macau, reports third-quarter earnings Wednesday after the close of US markets, with analysts and investors bracing for the gaming giant’s comments on its China business.

As always, Macau will loom large when Las Vegas Sands reports third-quarter results on Wednesday. (Image: Reuters)

Wall Street analysts are expecting that Sands will post earnings per share (EPS) of 75 cents for the July through September period on revenue of $3.3 billion. In the second quarter, LVS earned 72 cents on turnover of $3.3 billion. Some estimates for the most recently completed period call for EPS ranging from 76 cents to as high 78 cents.

LVS, which joined the widely observed S&P 500 Index earlier this month, doesn’t have a recent history of positive earnings surprises. Over the previous four quarters, the gaming company beat Wall Street EPS forecasts just one time – in the first quarter of this year.

Las Vegas Sands stock has trailed the market this year, but investors are hoping their luck will change with the casino operator’s next earnings report,” according to Barron’s.

Shares of LVS are up 11.37 percent year-to-date, well behind the 20 percent return posted by the S&P 500. But the gaming company’s stock has recently shown some signs of life, gaining almost three percent since Oct. 1.

All About Macau

Sands owns the Palazzo and Venetian on the Las Vegas Strip, two of Sin City’s glitziest venues. But when it comes to the company’s financials, the investment community places heavy emphasis on Macau and, to a lesser extent, Singapore, where LVS runs the Marina Bay Sands.

In the second quarter, LVS, the operator of the Plaza Macao, Sands Macao, and Venetian Macao, among other properties on the peninsula, generated nearly two-thirds of its revenue from the Chinese Special Administrative Region (SAR).

Underscoring the sensitivity of LVS shares to the company’s Macau exposure, the stock tumbled following that earnings update, as investors digested news that earnings before interest, taxes, depreciation and amortization and revenue in the Chinese territory missed estimates.

“A major problem for the company is the US-China trade war,” according to Barron’s. “As negotiations drag on and Chinese economic data is mixed, the effects have been worrisome for the island gambling hub of Macau.”

Analysts have noted that LVS is less dependent on Macau’s VIP market than rivals, such as Wynn Resorts Ltd. (NASDAQ:WYNN), and that Sands has durable competitive advantages when it comes to luring mass and premium mass market gamblers to its properties there.

What’s Next

LVS stock resides just under $59 as of this writing. While the shares have rebounded somewhat from the third-quarter doldrums caused by the disappointing second-quarter earnings report and escalating US/China trade tensions, the stock still needs to gain more than 10 percent from here to reclaim its July highs.

Of the 20 Wall Street analysts covering LVS, 11 have “outperform” or “buy” ratings on the name, while nine call it a “hold.” The average price target on the stock is $69.39, implying upside of 17.6 percent from current levels.