Can Las Vegas Sands Be Stopped?

Despite reporting revenue and earnings that topped analyst estimates, shares of Las Vegas Sands tanked more than 3% on Apr. 25. Is this a sign that investors should take a gander at Wynn Resorts or Melco Crown, or does Las Vegas Sands's growth rate make the company look irresistible?

Daniel Jones
Daniel Jones
Apr 28, 2014 at 5:30PM
Consumer Goods

Source: Las Vegas Sands. 

After the market closed on April 24, Las Vegas Sands (NYSE:LVS) reported earnings and revenue for the first quarter of its 2014 fiscal year. Much to the pleasure of shareholders, the company beat on both revenue and earnings. Given these strong results, is Las Vegas Sands still a strong buy or should the Foolish investor consider Melco Crown Entertainment (NASDAQ:MLCO) or Wynn Resorts (NASDAQ:WYNN) instead?

Las Vegas Sands had an awesome quarter!
For the quarter, Las Vegas Sands reported revenue of $4.01 billion. This represents a 3% beat compared to the $3.88 billion analysts anticipated and was 21.5% above the $3.30 billion from the same quarter last year. According to the company's earnings release, the jump in sales was due to strong performance across most of its casinos, primarily those located in Macao.

During the quarter, its Venetian Macao operations saw revenue shoot up 36% from $872.2 million to $1.18 billion, making it the company's largest casino. Further outperformance came from the Sands Cotai Central and the Four Seasons, which saw their revenue rise 41% and 66%, respectively. Each of these hotels was positively affected by the booming Macao casino market.

Revenue in millions 2014 2013 % Change
Venetian Macao $1,180 $872.2 35.8%
Sands Cotai Central $827.6 $587.2 40.9%
Four Seasons Hotel Macao and Plaza Casino $370.0 $223.2 65.8%
Sands Macao $314.0 $310.0 1.2%
Marina Bay Sands $835.4 $794.9 5.1%
Las Vegas operations $382.7 $411.5 -7%
Sands Bethlehem $117.2 $122.9 -4.6%

Source: Las Vegas Sands.

From a profitability perspective, the company did even better. For the quarter, Las Vegas Sands saw its earnings per share come in at $0.95. In addition to being $0.02 higher than forecasted, the company's bottom line was 38% above the $0.69 management reported during the first quarter of 2013.

This jump in profits was due, in part, to a rise in revenue, but was also attributable to some reductions in cost. The company's resort operations expenses fell from 64.9% of sales last year to 63.3% of sales this year. Another reduction in cost was Las Vegas Sands's depreciation and amortization expenses, which fell from 7.6% of sales to 6.5%.

But how does Las Vegas Sands roll compared to its peers?
Over the past few years, Las Vegas Sands has been a terrific growth machine. Between 2011 and 2013, the company saw its revenue rise 46% from $9.4 billion to $13.8 billion. The main driver behind the company's explosive growth has been its exposure to Macao. In this region, the company's revenue skyrocketed 82% from $4.93 billion to $8.99 billion, which caused Las Vegas Sands Macao revenue to go from 52.4% to 65.3% of its total sales.

LVS Revenue (Annual) Chart

Las Vegas Sands revenue data by YCharts.

However, it would be a mistake to think that Las Vegas Sands is the only casino giant benefiting from Macao. Both Melco Crown and Wynn Resorts have a significant footprint in the region as well. Over the past three years, Melco Crown saw its revenue rise 33% from $3.83 billion to $5.09 billion, all of which stemmed from Macao. While the company is currently the best pure play in the region, it intends to open its City of Dreams Manila resort in 2014, making it the casino's first international location.

While both Las Vegas Sands and Melco Crown appear to have been wildly successful in Macao and (in the case of the former), successful in general, Wynn Resorts hasn't been as lucky. Over the past three years, Wynn Resorts saw its revenue rise just 7% from $5.27 billion to $5.62 billion. This has been largely attributable to management's decision not to rely too much on Macao. While the business did report that 72% of its revenue came from Macao in 2013, this is essentially unchanged from 2011.

Foolish takeaway
With the booming Asian market, it shouldn't be a surprise to see how well Las Vegas Sands performed. This is especially true when you look at how well the company has done over the long run. Moving forward, it will be interesting to see if management can maintain its growth rate. This could make the company a very attractive prospect, but for the Foolish investor who feels uncomfortable with Las Vegas Sands, both Melco Crown and Wynn Resorts could be appealing alternatives.