Investors rolling the dice on Las Vegas Sands (LVS 1.95%) stock came up snake eyes on Thursday after the company published its latest set of quarterly and annual earnings. Although the veteran casino resort operator beat analyst estimates for both revenue and profitability, other factors raised significant investor concerns. These were enough to push the share price down by nearly 14% that trading session.
Twin beats insufficient
Sands unveiled those figures just after market close on Wednesday. They showed the company earned net revenue of $3.65 billion, up 26% on a year-over-year basis.
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Despite its name, Las Vegas Sands no longer operates casinos in its namesake American city. It has entirely decamped for Asia, with five properties in Macao and a single resort (Marina Bay Sands) in Singapore. All, save for its Sands Macao, recorded revenue gains across the one-year stretch.
On the bottom line, net income under generally accepted accounting principles (GAAP) also headed north, rising 14% to $395 million. On a non-GAAP (adjusted), per-share basis, profitability rose to $0.85 from $0.54.
Both headline figures topped the average analyst estimates, which were $3.33 billion in revenue and adjusted net profit of $0.77 per share.
Since Las Vegas Sands is nearly all in on Macao, investors were troubled by the $608 million collective adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) posted by its resorts in the enclave. This was 6% higher year-over-year, well below the company's other growth figures. That total was also notably south of $806 million reaped by Marina Bay Sands alone.
NYSE: LVS
Key Data Points
Seismic shift
There's a major reason for Macao's drag in profitability -- over the past few years Chinese authorities have put significant restrictions on high-roller gamblers. This puts the skids on a juicy revenue source for casino operators, who are forced to concentrate on the lower-margin, mass market instead.
Unfortunately, this isn't a quirk or a trend that will fade quickly; it's a long-term change in Macao's gambling culture. Given that, I'd also be bearish on Las Vegas Sands' future these days.
