Shares of Las Vegas Sands Corp. (NYSE:LVS) traded lower by as much as 3% last Thursday as a result of a slight earnings miss. While shares are up over 20% year to date, they have come well off the highs over the last few weeks. Just a couple months ago, shares traded just above $60 before pulling back sharply as economic and managerial headwinds from none other than the Chief Executive Officer, Sheldon Adelson, hit the wires.
If you have followed my recent articles regarding the company, you would see that I have been extremely bullish when it comes to its longer-term prospects. Even amid executive step downs, China slowdowns, lawsuits, and a number of other struggles, the company has positioned itself as a global leader in the addictive gambling sector. In this article, I would like to review what was a strong quarter, take a look at the long-term prospects, and look at the competitive landscape within the sector.
Las Vegas Sands Corp. (NYSE:LVS) reported its second-quarter results recently. The company reported a 120% increase in its second-quarter net income to $529.8 million, or $0.64 per share, from $240.6 million, or $0.29 per share, on a year over year basis. On an adjusted basis, the company reported EPS of $0.65 compared to analysts’ consensus estimates of $0.68 per share. The miss was due in large part to lower than anticipated table wins out of some of its properties.
Macau, the driver of growth and revenue over the last few years, performed well with record setting table wins and impressive volume growth. Mass table win in Macau for the quarter was up an astonishing 61% to a record $930 million. Las Vegas Sands Corp. (NYSE:LVS) was able to grow twice as fast as the rest of the market in the most significant business segment. The company set record volumes, up 25.7% in the quarter to $42 billion.
Adjusted EBITDA across the Macao property portfolio expanded 53.2% to reach yet another record of $657.2 million. Some may say that gambling is addictive, and will outperform a broad Chinese slowdown, as with many inelastic services. Strength was seen in places other than gaming. Within the Venetian Macao, mall and retail revenue rose a whopping 17.9% and 25.2%, respectively.
The company announced that it had begun construction of its sixth property in Macau. The Parisian Macao, in early construction, will offer consumers the integrated resort benefits long associated with the company’s array of properties in Macau. The Parisian Macao will be seamlessly integrated with the company’s other Cotai Strip properties, including the Venetian Macao, the Four Seasons Macao, Plaza Casino, and Sands Cotai Central to create a great experience for the masses.
While the rest of China may slowing down, Macau has remained hot. Officials predicted earlier this month that gambling revenue will grow 19% in July on a year over year basis to $3.68 billion. Las Vegas Sands Corp. (NYSE:LVS) is set to capture a great deal of this revenue with its 21.5% market share, up from 20.5% last year. Rising income and levels of employment within Macau bodes well for long-term growth, but accessibility improvements will weight far more. A number of train improvements will open up the accessibility of Macau for the average Joe. In addition, the Hong Kong–Zhuhai–Macau Bridge, set to open in three years, will give travelers easy access to the district in only 20 minutes from the Hong Kong airport.
The Street has speculated for some time regarding the rumors of special dividends and shareholder programs on the back of management’s hints. Should the company spin off its non-essential retail assets in Macau, some of the most valuable in the world, it could afford to payout a nice dividend or pay down its debt further.