Las Vegas Sands Corp. (NYSE:LVS) is a hotel, gaming, and retail mall company headquartered in Las Vegas, NV. It has been reporting lower-than-expected sales for the past few quarters due to sluggish performance in Macau, its key operating region.
A Look at the Past Quarter's Result
Shares have declined over 12% since it reported lower-than-expected first quarter earnings in Apr 2016. Estimates also moved southwards after the earnings announcement.
Las Vegas Sands missed the Zacks Consensus Estimate for both earnings and sales in the first quarter of 2016. While earnings per share declined almost 32% year over year, sales went down almost 10% due to weak performance in Macau. Gross gaming revenues in Macau declined in double digits once again. In fact, gambling revenues from the region have declined in double digits since Sep 2014.
What's Behind the Weakness in Macau?
The Macau slowdown is mainly due to high-stake gamblers curtailing their spending amid a slump in the Chinese economy. Also, the countrywide crackdown on corruption in China has forced Macau officials to enforce strict restrictions on VIP gamblers. This was done to stop billions of dollars from being siphoned off illegally from mainland China to Macau.
Other restrictions like curbing the use of state-backed payment processor UnionPay made it harder for players to obtain cash for gambling. A smoking ban in casinos and limitations on visas also hurt visits. Further, Chinese visitors accounted for more than 60% of Macau’s traffic. The deterioration of the yuan contracted Macau’s gambling revenues by making it more expensive for Chinese gamblers to place their bets.
Is Competition Strong?
Though Las Vegas Sands is consistently trying to diversify its revenue sources to defy the weakness in the VIP segment, extensive competition in the Macau market, might hamper the company’s market share. Wynn Resorts Ltd. (NASDAQ:WYNN) , another casino operator, is also building a full-scale integrated resort on the Cotai Strip, which is expected to start operation around the end of 2016. Another U.S.-based casino giant, MGM Resorts International (NYSE:MGM) , is set to open a resort in Cotai in early 2017. These openings may pose a huge threat to the company’s business in the region and may continue to hurt margins despite Las Vegas Sands’ efforts to pose a turnaround in the mass and non-gaming markets.
Las Vegas Sands currently holds a Zacks Rank #4 (Sell).
A better-ranked stock in the same industry is Isle of Capri Casinos, Inc. (NASDAQ:ISLE) , sporting a Zacks Rank #1 (Strong Buy).
LAS VEGAS SANDS (LVS): Free Stock Analysis Report
WYNN RESRTS LTD (WYNN): Free Stock Analysis Report
MGM RESORTS INT (MGM): Free Stock Analysis Report
ISLE OF CAPRI (ISLE): Free Stock Analysis Report
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