Sands Macau With
Photos: Las Vegas Sands, Yahoo! Finance; Editing: Bradley Seth McNew

Las Vegas Sands (NYSE:LVS) second quarter earnings release, which came out a couple weeks ahead of competitors Wynn Resorts (NASDAQ:WYNN) and MGM Resorts International (NYSE:MGM), has disappointed many analysts and investors as the revenue and EPS the company reported came in lower than expectations. Due to this disappointment, the stock is down slightly following the release. However, ahead of Wynn and MGM's release coming the first week of August, will Las Vegas Sands still be the industry leader like it was for Q1?

Las Vegas Sands, the results were still good
Las Vegas Sands posted a Q2 net income increase of 27% year over year. However, while revenue of $3.62 billion was an increase of 12% year over year, it still brought EPS for the quarter to 85 cents a share, below analyst expectations of 90 cents a share. Yes, Las Vegas Sands reported slightly below expectations, but consider that those expectations were made following record breaking results from Las Vegas Sands Q1 results that were by far the highest in the industry, well ahead of competitors Wynn Resorts and MGM Resorts.

Adelson Via Bloomberg

Sands CEO Sheldon Adelson has led the company to industry high results, and there are more reasons than ever to continue believing in his guidance. Photo: Bloomberg

Furthermore, investors are scoffing at 27% income growth? That's ridiculous. With EBITDA in Macau up 21.9% YoY, and adjusted earnings per share, even below expectations, still up 29.7% YoY, it seems that analysts are getting so used to Sands incredible profits each quarter that they are getting jaded by just how incredible these kinds of growth rates are.

How will these results hold up to Wynn and MGM?
The issues that have caused slower than usual revenue growth in Macau during this second quarter, such as attention on Macau during the World Cup and lowered growth from its VIP segment of gamers, were industry wide, not specific to Las Vegas Sands. Thus, the same affect will likely be applied to MGM and Wynn in their coming earnings. When these two companies report earnings in a few days, expect to see lowered revenues for them as well in these areas.

This is especially problematic for Wynn Resorts, which has relied more heavily on VIP revenues recently than Las Vegas Sands. If the VIP segment drop caused a temporary drop for Sands, it will likely be even worse for Wynn. However, the switch to mass market focus is good for the industry long term and will continue to drive growth in Macau for years to come, especially for Las Vegas Sands. The second quarter for Las Vegas Sands was no exception. Las Vegas Sands posted big wins from the mass market in Q2, and this should pay off as the company continues this trend in years to come. 

Mass Market Growth Through Q
Source: Las Vegas Sands Q2 earnings presentation

For MGM Resort, lowered VIP revenues in Macau might not be such an issue, as MGM only gets 37% of its revenue from Macau, compared to Wynn Resorts' 75% of global revenue coming from Macau. MGM has much more of its revenue coming from Las Vegas which seems to have started to rebound slightly this year. While those Las Vegas revenues still can't compare to Macau's yet, there is at least reason to believe that MGM will not be in as much risk this quarter as Wynn in declining Macau VIP growth. However, the rebound in Las Vegas has not happened yet, and revenues there are still below 2008 peaks. Additionally, intense competition over the next few years, now including Malaysia's Genting Group and their massive new Resorts World Las Vegas coming in 2015, will make it increasingly difficult for MGM to turn a huge profit from Las Vegas.

Las Vegas Sands probably beat the competition in Q2
Las Vegas Sands led the field with first-quarter 2014 revenue of a record $4.01 billion, up over 21% year-over-year. MGM Resorts came in at a not-so-close second with revenue growth of barely more than half of that of Las Vegas Sands, and Wynn came in third for this group. With strength in mass market gaming, and what should still be industry high revenue growth this quarter ahead of MGM and Wynn, and most importantly, still very strong growth Q2 income growth, Las Vegas Sands still looks like a great bet.

 

Wynn Resorts

MGM Resorts

Las Vegas Sands

Q1 Net Revenue Growth YoY

9.7%

12%

21.4%

Q1 Net Revenue Growth YoY

TBA

TBA

12%

Share Price in April

$219

$24.33

$76

Share Price in July

$204

$25.5

$73.8

P/E (TM)

27.6

249.8

24.1

P/E est. 2015

21.4

38.7

16.7

Source: Yahoo! Finance

Foolish takeaway: Still the best bet in gaming
Analysts and investors that were waiting for Las Vegas Sands to have another showing like they had in Q1 are now disappointed by Sands' earnings missing EPS expectations. However, still very strong growth in revenue, EPS, and net income are continuing to drive Las Vegas Sands forward, and will likely be ahead of Wynn and MGM this quarter as well. Thus, the recent dip following the small miss in EPS expectations presents a buying opportunity for investors looking to get in on Las Vegas Sands for what is still incredible growth.

Bradley Seth McNew owns shares of Las Vegas Sands. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.