On Aug 29, we issued an updated research report on
Las Vegas Sands Corp.
On Jul 16, Las Vegas Sands posted lower-than-expected
second-quarter 2014 results with earnings and revenue missing the
Zacks Consensus Estimate, possibly due to a sluggish Macau market.
However, adjusted earnings of 85 cents per share in the second
quarter grew 30.8% year over year, owing to an increase in revenues
and margins. Total revenue also increased 11.7% year over year to
$3.62 billion driven by strong revenues from its properties in Las
Despite an 8.1% year-over-year increase in operating expenses,
operating margin expanded 250 basis points to 26.5% in the quarter,
driven by an increase in revenues.
Las Vegas Sands, one of the leading companies in the gaming and
lodging industry, is well poised to grow both strategically and
financially. The company is concentrating on renovation and
promotion of its Las Vegas properties in order to drive segment
Though tourism in Las Vegas has not yet reached pre-recession
levels, it is on its way to recovery. In fact, performance in Las
Vegas was better than expected in the second quarter and it is on
track to break its annual visitation record. This visitation
pattern in the Las Vegas market will be beneficial for the company
in the coming quarters.
Las Vegas Sands also boasts various prestigious properties in Macau
and generates over 80% of its revenues from the region. However,
the region is currently in trouble. Gross gaming revenue in Macau
for the months of August, July and June declined 6%, 3.6% and 3.7%,
respectively. In fact, the decline in June was the first instance
of decline since Jun 2009.
The slowdown can be attributed to the fact that high-stake gamblers
are curtailing spending amid a cooling Chinese economy. Also, the
nationwide crackdown on corruption in China has compelled Macau
officials to impose restrictions on VIP gamblers in order to stop
billions of dollars from being siphoned off illegally from mainland
China to Macau.
Restrictions like limiting the use of state-backed payment
processor UnionPay is making it harder for players to obtain cash
to gamble. Moreover, tighter restrictions on visas and the
impending ban on smoking in casinos would put pressure on gaming
revenues in the upcoming quarters.
However, currently strong growth in the mass market is mitigating
the effects of a slowdown in the VIP gaming business to some
extent. We expect the company's Macau properties to benefit highly
from the increasing demand pattern and the flourishing mass market
segment, going ahead. Las Vegas Sands presently has a Zacks Rank #3
Other Stocks to Consider
Better-ranked stocks in the same industry include 500.com Limited (
) and MGM Resorts International (
). While 500.com Limited sports a Zacks Rank #1 (Strong Buy), MGM
Resorts carries a Zacks Rank #2 (Buy). Investors can also
consider China Lodging Group, Ltd (
), a stock from the consumer discretionary sector that also carries
a Zacks Rank #2.
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LAS VEGAS SANDS (LVS): Free Stock Analysis
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