Why Is Las Vegas Sands (LVS) Down 8.1% Since Last Earnings Report?

It has been about a month since the last earnings report for Las Vegas Sands (LVS). Shares have lost about 8.1% in that time frame, underperforming the S&P 500 and the DJIA.

Will the recent negative trend continue leading up to its next earnings release, or is Las Vegas Sands due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Las Vegas Sands Q2 Earnings Miss Estimates

Las Vegas Sands reported lower-than-expected second-quarter 2018 earnings, after beating the estimates in the trailing five quarters. However, revenues came ahead of the Zacks Consensus Estimate for the sixth straight quarter.

In second-quarter 2018, adjusted earnings per share of 74 cents missed the Zacks Consensus Estimate of 80 cents but increased 1.4% year over year on higher revenues. However, net revenues came in at $3.30 billion, outpacing the consensus mark of $3.28 billion and improved 6.2% on a year-over-year basis. Lower Rolling Chip volume and win percentage at Marina Bay Sands in Singapore led to lower-than-expected earnings in the quarter under review. However, performance across Macao was robust in the quarter.

Furthermore, the company remains focused on a convention-based Integrated Resort business model. Notably, this business model helps in generating the most diversified set of cash flows and profit from non-gaming segments besides bringing unsurpassed economic and diversification benefits to the regions in which it operates.

Property Performances: Asian Operations

Las Vegas Sands’ Asian business includes the following resorts:

The Venetian Macao

Net revenues increased 23.1% year over year to $830 million. The upside can be attributed to a 25.8% increase in casino revenues, 30% growth in room revenues, a 1.8% improvement in mall revenues and a 5.9% rise in food and beverage revenues. Revenues convention as well as retail and other revenues also rose 12.5% each.

Adjusted property EBITDA was up 29.3% year over year to $331 million in the quarter under review.

While Non-Rolling Chip Drop increased 32.4%, Rolling Chip volume improved 44.3%.

Sands Cotai Central

Net revenues were up 15.9% year over year to $509 million. The improvement was driven by a 16.6% increase in casino revenues, a 21.9% rise in room revenues, a 7.1% improvement in mall revenues and 16.7% gain in Convention, Retail and Other revenues. However, Food and Beverage revenues fell 4.2% from the year-ago level.

Adjusted property EBITDA was $176 million, up 31.3% year over year.

While Non-Rolling Chip Drop rose 19.6%, Rolling Chip volume was up 2.8%.

The Parisian Macao

Revenues increased 5.1% year over year to $371 million, courtesy of an 8.1% rise in casino revenues and a 6.7% increase in Food and Beverage revenues. However, the same from Room and Mall declined 9.7% and 11.8%, respectively.

Adjusted property EBITDA rose 7.5% year over year to $114 million.

Non-Rolling Chip Drop improved 8.6% while Rolling Chip volume rose 19.1%.

The Plaza Macao and Four Seasons Hotel Macao

Net revenues rose 37.8% to $186 million on a 54.5% increase in casino revenues as well as 16.7% and 25% increase in food and beverage revenues, and Rooms revenues, respectively. Mall revenues also increased 3.1%.

Adjusted property EBITDA increased 20% to $72 million.

Non-Rolling Chip Drop and Rolling Chip volume increased 7.8% and 9.6%, respectively.

Sands Macao

Revenues were up 15.4% year over year to $180 million owing to a 15.3% gain in casino revenues and a 16.7% surge in Food and Beverage revenues. However, Rooms revenues declined 20%.

Adjusted property EBITDA jumped 33.3% to $52 million.

While Non-Rolling Chip Drop increased 5.3%, Rolling Chip volume was up 41.9%.

Marina Bay Sands, Singapore

Net revenues slumped 15.5% year over year to $705 million due to 24.1% decline in casino revenues. Nevertheless, Rooms revenues as well as convention retail and other revenues rose 16.3% and 13.6%, respectively. Mall as well as Food and Beverage revenues also increased a respective 5% and 24.4%.

Adjusted property EBITDA in the quarter was $368 million, down 25.2%.
Non-Rolling Chip Drop were up 5.5%, whereas Rolling Chip volume declined 32.6%.

Domestic Operations

Las Vegas Operations

Net revenues from Las Vegas operations, which comprise The Venetian Las Vegas and The Palazzo including the Sands Expo and Convention Center, increased 2.6% to $402 million owing to a 10.4%, 15.2% and 5.2% rise in rooms, food and beverage, and convention, retail and other revenues, respectively. The results were, however, somewhat offset by a 25.9% decline in casino revenues.

Adjusted property EBITDA in the quarter was $77 million, down 2.5%.

Table Games Drop decreased 2.8%, while Slot Handle rose 12.7%.

Sands Bethlehem, PA

Net revenues at Sands Bethlehem totaled $136 million, down 4.9% year over year due to a 4.8% decline in casino revenues and a 14.3% decrease in food and beverage revenues. Rooms, mall as well as convention, retail and other revenues remained flat in the quarter.

Operating Results

On a consolidated basis, adjusted property EBITDA was up 1.4% year over year to $1.23 billion in the second quarter. The upside can be attributed to robust operating momentum in Macao and Sands Cotai Central operations.

Adjusted net income increased 1.9% year over year to $588 million.

Balance Sheet

As of Jun 30, 2018, unrestricted cash balances were $4.35 billion. Total debt outstanding, including the current portion and net of deferred financing costs along with original issue discount, was $11.32 billion.

In the reported quarter, capital expenditures came in at $178 million. This was mainly owing to construction, development and maintenance activities of $95 million in Macao, $37 million at Marina Bay Sands, $37 million in Las Vegas and $9 million at Sands Bethlehem.

Quarterly dividend paid by the company was 75 cents per share, while it repurchased $100 million of common stock.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Las Vegas Sands has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Las Vegas Sands has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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