GM and Las Vegas Sands: This Week's Growth and Income Stocks

Las Vegas Sands LVS is headquartered in Las Vegas, and has properties in Macau, Pennsylvania, Singapore, and Vegas.  It is a developer, and operator of world class resorts and hotels.  They offer retail, gaming, entertainment, convention facilities, and fine dining. 

Management has been focused on several key drivers for the company which include, a three year $1.1 billion capital plan, strengthening its VIP business, and property remodeling.  The capital plan will rebrand and renovate its resort in Macau from the Sands Cotai Central to The Londoner Macao. This plan also includes the renovation and the addition of hundreds of new suites at the St. Regis and Four Seasons Macau.  The goal is to increase the company’s share of high spending Chinese tourists at Asia’s leading leisure tourism and business destination. 

Management has also improved its position in the VIP area as volumes and margins continue to rise across the world, with better than expected traction in both Macau and Singapore.  The remodeling plan has already begun to attract more customers who are flocking to the luxury accommodations, and expanded retail shopping within its malls.   The addition of the new suites and retail offerings has already positively impacted the top line as both occupancy rates, and retail mall revenues have increased. 

On the income side, last quarter management increased its quarterly dividend payment by 3% for an annual dividend yield of 4.16%.  Further, due to the continued growth in both Macau and Singapore, expectations are that the company will approve another dividend hike after it reports earnings on January 24th.  Further, LVS has a share repurchase program that has consistently purchased about $75 million of common stock each quarter as part of its $2 billion program started in 2013.

Las Vegas Sands is a Zacks Rank #2 (Buy), and has beaten both the top and bottom line expectations for the past three consecutive quarters.  Also, over the last four quarters the company has posted an average positive surprise of +9.1%.  These better than expected performances, management’s long term plans, and an improving economy has caused analyst’s earnings estimates to improve of the past 90 days as the next two quarters and FY 17 & FY 18 have all seen positive revisions. 

General Motors GM recently announced full-year 2017 and December sales numbers, and they were much better than expected.  The company reported that they delivered just over 3 million vehicles in the United States in 2017 with record sales in both the truck and crossover categories; 1.3 million and 965,090 respectively.  GM also set delivery and sales records for electric vehicles, and average transaction prices.  Further, management was able to reduce year end inventories to 63 days, well below the expected 70 day supply. 

In Canada, total vehicle sales improved by +9.2% in December YoY.  GM Canada sold 302,826 total vehicles in 2017, a +13.3% increase YoY. 

In the crossover segment, GM’s deliveries were up 17% YoY, and grew its retail share by 1.6% to 13.1% growing more than any other automaker.  In the pickup truck segment, GM sold more vehicles in the U.S. than any other automaker for the fourth consecutive year with a record 948,909 units sold.  In the full-sized SUV segment, GM sold 239,719 units, and maintained its grip as the segment leader since 1935.  In the Commercial and Government segment, GM sold 296,000 units, the highest total since 2008.  The sales enabled GM to capture more of the market share than any other competitor. 

Also, GM saw its average transaction prices increase to $35,400 for the year and $38,000 in December which were both record highs.  The industry average is $31,600. 

Management’s focus to move away from passenger cars and concentrate on SUV’s and pickups has helped it capture a bigger portion of the market share, and reduce costs.  Going into 2018, management expects to sell just below 17 million new vehicles, about a half a million shy of the record 17.55 million units in 2016.  Further, the company believes that increasing interest rates will only be a minor headwind with the tax cuts being a net positive for the industry. 

GM is also looking to the future, as they recently announced that they will launch a “new family” of electric vehicles in 2021.  Management is looking to launch 20 new vehicles by 2023.  These electric vehicles are expected to cost less to build, and have higher profit margins than their predecessors.  The goal is to sell 1 million electric vehicles by 2026.  This push into electric vehicles will help them capture more of the Chinese market as its government has recently imposed new emission rules set to begin in 2019.

GM also has a very nice +3.64% annual dividend, and has consistently repurchased millions of shares over the past three years; 2015 102 million, 2016 77 million, 2017 85 million for a total of 265 million shares at a cost of just over $9 billion.

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