We reaffirm our Neutral recommendation on
Las Vegas Sands Corp.
) following mixed second-quarter 2013 results. While the
company's earnings in the second quarter beat the Zacks Consensus
Estimate, its sales missed the same.
Why the Reiteration?
On Jul 24, 2013, Las Vegas Sands posted second-quarter 2013
adjusted earnings of 72 cents per share, beating the Zacks
Consensus Estimate of 69 cents by 4.3% and the prior-year
quarter's earnings of 51 cents by 41.2%. Strong margins boosted
the bottom line. The company's revenues of $3.24 billion grew
25.6% year over year on the back of solid Macau as well as
Overall, we remain encouraged by the company's strong brand
portfolio and its ability to navigate through a difficult
operating environment. Apart from the U.S. and Chinese markets,
the company's venture into new markets especially in Japan,
Korea, Taiwan and Vietnam, South America and Europe is expected
to be beneficial in the long term.
Las Vegas Sands generates over 80% of its revenues from its
properties in Macao, the biggest and highly profitable gaming
destination in the world. We remain hopeful about the increase in
demand and the flourishing mass market segment in Macao.
After a few weak quarters, the company's business at Marina
Bay Sands, Singapore appears to be improving. The company is also
witnessing solid growth in its mass market business in the
region, driven by new marketing programs.
Las Vegas Sands is currently developing the Sands Cotai
Central resort project at Cotai Strip in Macao. Since the opening
of the projects' phase I and phase II operations, it has
witnessed huge footfall. Gaining from growing gaming businesses
and increased non-gaming operations, Sands Cotai generated solid
revenues in the past four quarters. Considering such higher
revenue gains, the company has decided to commence the third
phase of the project that will cost around $450 million.
Following the completion of the Sands Cotai Central project, it
is expected to provide more of a draw for the destination
Despite such positives, we remained concerned about the Zacks
Rank #3 (Hold) company's high debt level. In the recently
concluded second quarter, the company's revenues missed the
ZacksConsensus Estimate by 1.5%, which is a major cause of
We also remain skeptical about Las Vegas Sands' European
integrated resort project - EuroVegas - in Madrid, Spain as the
successful completion of the project is subject to many terms and
conditions of the government.
Moreover, highly competitive markets of Las Vegas and Macao
have added to the woes. The company's upcoming project at Cotai
Strip will face extreme peer pressure from several Chinese casino
operators and other U.S.-based companies. The excess supply,
especially in the Macao market, might reduce the company's market
Though the company's Las Vegas business is improving lately,
we prefer to remain on the sidelines until a complete recovery in
the situation takes place.
Other Stocks to Consider
Some other companies from the gaming industry that are worth
considering at the current level include
Monarch Casino & Resort Inc.
Multimedia Games Inc.
Pinnacle Entertainment Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
LAS VEGAS SANDS (LVS): Free Stock Analysis
MONARCH CASINO (MCRI): Free Stock Analysis
MULTIMEDIA GAME (MGAM): Free Stock Analysis
PINNACLE ENTRTN (PNK): Free Stock Analysis
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