Las Vegas Sands Earnings Weren’t Great, But Analyst Says Stay For The Dividend, Company Best-Positioned in Industry

Posted on: October 25, 2019, 12:05h. 

Last updated on: October 25, 2019, 01:07h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Las Vegas Sands Corp.’s (NYSE:LVS) third-quarter results, which were released Wednesday, weren’t great. Earnings of 69 cents a share on revenue of $3.25 billion missed Wall Street estimates of 75 cents a share on turnover of $3.30 billion. But analysts remain mostly bullish on the stock.

Sheldon Adelson’s return to earnings calls and a higher dividend are propping up LVS shares this week. (Image: CNBC)

At this writing Friday, Sands stock is trading slightly lower, but the shares are up about 6.65 percent this week, indicating softness in the company’s Macau business was already baked into the stock ahead of Wednesday’s earnings report. LVS reported third-quarter revenue on the peninsula of $2.11 billion, slightly below the estimate of $2.13 billion.

While the China results were tepid, LVS shares have been boosted over the past couple of days for other reasons, including chairman and CEO Sheldon Adelson’s participation on the earnings conference call and news of a high dividend.

Adelson is dealing with non-Hodgkin’s lymphoma, having previously missed the first and second-quarter calls. But analysts believe his participation Wednesday heartened investors that are concerned about his health.

In the near term, LVS is increasing its annual dividend to $3.16 (+$0.08) for 2020, marking the eighth consecutive year of div growth and highlighting the stability of cash flows,” said Macquarie analyst Chad Beynon in a note out earlier today.

Based on that dividend increase, which goes into effect next year, LVS yields 5.1 percent and its payout increase streak is one of the longest in the gaming industry.

Mastering Macau Mass Market

Weakness in the Macau VIP market is vexing some other operators, but LVS remains one of the sturdier names in the Special Administrative Region (SAR) due to its strength with mass and premium mass market gamblers.

“While Macau EBITDA (flat YoY) missed the consensus by 2%, we think investors will be content with stable mass market share and solid premium mass growth (+6% QoQ),” said Beynon.

In the July through September quarter, LVS posted adjusted property earnings before interest, taxes, depreciation and amortization (EBITDA) of $1.28 billion across its eight properties, with the Palazzo and Venetian on the Las Vegas Strip representing just $93 million of that tally, underscoring the importance of Asia to the company’s bottom line.

Beynon sees Macau and Singapore, and perhaps Japan down the road, as catalysts for LVS shares.

“We continue to believe LVS is best-positioned over the long term, as the company invests over $5bn in Macau and Singapore, and continues its push for a Japan license,” said the Macquarie analyst. “In our view, investors should look past 2019/2020, when growth is projected to be <5%, and consider future returns on these investments and potential market share gains.”

Boosted Forecasts

At a time when analysts tracking various industries, including gaming, are paring earnings estimates on some well-known companies, Beynon is doing the opposite with Las Vegas Sands.

In the note, the Macquarie analyst boosted his 2019 earnings per share (EPS) forecast on the casino giant to $4.11 a share from $4.06. For 2020, Beynon is projecting LVS will earn $3.42 a share.

He maintains a $73 price target on the stock, implying upside of about 20 percent from current levels.