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Earnings Preview: What to Expect From Las Vegas Next Week

By Travis Hoium - Jul 23, 2017 at 11:09AM

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Earnings season is here and this is what we should look for from Las Vegas gaming giants.

Wynn Resorts (WYNN 3.40%) and Las Vegas Sands (LVS 2.84%) both report second quarter earnings next week, setting the stage for the industry's earnings season. And with a presence in both Las Vegas and Macau, they will give us a look at how the world's two largest gaming markets are performing in 2017. 

Here's a look at what to look for when both companies report. 

Macau's skyline at night.

Image source: Getty Images.

The bar gaming companies want to beat

We know from reports from Macau's Gaming Inspection and Coordination Bureau that gaming revenue rose 21.9% in the second quarter of 2017. And that's the bar Wynn and Las Vegas Sands should be measured against. 

I think the best comparison is to gaming volume, or rolling and non-rolling chip volume, at each resort. This takes luck out of the equation, which can shift from quarter to quarter. For Wynn, the comparison will be difficult because Wynn Macau gave some gaming tables to Wynn Palace when it opened and the latter casino hasn't been open for a full year to make a comparison. But investors should see if gaming volume was up sequentially compared to a slight decline for Macau overall. I also expect Wynn Palace to increase revenue and EBITDA sequentially as it reaches full operations. 

At Las Vegas Sands, volume at Venetian Macau, Sands Cotai Central, and Sands Macau will be worth watching. They may all underperform Macau as a whole because of new competition opening within the last year, the company just wants to lose as little market share as possible. 

The rock for gaming companies

Las Vegas will be a little less volatile than Macau for Wynn and Las Vegas Sands. June data isn't out yet, but in the three months ended May 31, gaming revenue on the Las Vegas Strip was up 2.6% to $1.55 billion. That's a good proxy to compare performance against, but non-gaming activities account for most of Las Vegas's revenue now, so growth could be higher if room rates or entertainment revenue were strong. 

I don't expect a lot of growth from Las Vegas, but it'll be a solid contributor to the bottom line for both Wynn and Las Vegas Sands. And it's a base from which they can build future growth projects, like Wynn Boston Harbor or Las Vegas Sands's aspiration of building in Japan. 

What Wynn and Sands need to show investors

The proxies Wynn Resorts and Las Vegas Sands are going to be judged by will be a little different this quarter. Wynn needs to show that Wynn Palace is performing well, meaning it needs to show a lot of growth in Macau. 

Las Vegas Sands is much larger than Wynn Resorts and will be expected to continue to generate cash to pay its dividend. The 4.7% dividend yield is arguably the best reason to own the stock right now but the company needs to continue to pump cash out of Asia to make those payments to investors. So, steady results would be found, despite the addition of The Parisian to Macau's portfolio last fall. 

Travis Hoium owns shares of Wynn Resorts. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Wynn Resorts, Limited Stock Quote
Wynn Resorts, Limited
$67.57 (3.40%) $2.22
Las Vegas Sands Stock Quote
Las Vegas Sands
$37.69 (2.84%) $1.04

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