It was a big week for casino earnings reports, and we got a little bit of everything. Las Vegas Sands
There's an underlying theme here: The Las Vegas Strip and Macau markets continue to be exceptionally strong, while the regional players look to be pinched by new competition and slower-than-expected growth.
LVS gains momentum
With the opening of two massive projects on the immediate horizon, Las Vegas Sands reported a lot of different numbers, factoring in pre-opening expenses primarily for The Venetian Macao (Aug. 28 opening), Palazzo Las Vegas (Dec. 20 opening), and Marina Bay Sands in Singapore (opening in late 2009). That said, the figures to focus on are the property-level performances of The Venetian on the Las Vegas Strip and Sands Macao -- both of which were outstanding.
Property EBITDAR at The Venetian jumped 31.7% to $83.2 million, boosted by a 6% increase in hotel revenues to $93.3 million, a 19.8% gain in casino revenues to $85.4 million, and a 28.1% climb in food and beverage revenues to $45.1 million. The hotel gains came despite a 4.6% reduction in available rooms because of an ongoing room-renovation program. The hotel managed a 9.9% increase in the average daily rate (ADR) to $266. Combined with a 100.9% occupancy rate, RevPAR was up 11.2% to $268.
Meanwhile, across the pond, Sands Macao saw casino revenues jump 21.6% to $373.5 million. Property EBITDAR was roughly flat at $116.6 million, as the property carried $11 million in extra expenses to retain employees ahead of the opening of the Venetian Macao later this month.
Right now, the company has momentum, with strong operating performances and two big openings this year, along with the rest of the Cotai Strip, Marina Bay Sands, and Sands Bethworks (in Pennsylvania) all over the next few years.
Strip drives MGM
It's easy to get carried away with the price action on the stock. With the loss of the "private equity" premium over the past several weeks, MGM's stock has dropped off a high of $88.69 and fallen back down to earth. But as far as things within the company's control go, MGM continues to be stellar.
RevPAR at the company's Las Vegas Strip properties was up a healthy 7%, while the occupancy rate across the Strip properties was a whopping 97.8%. That's pretty good by any standard. MGM Grand Las Vegas, TI, and Excalibur all turned in record quarterly EBITDA, while The Mirage and New York-New York had record second-quarter performances.
Helped in part by the addition of the Beau Rivage in Biloxi, which was closed during last year's quarter, net revenues climbed 10% to $1.9 billion, helping boost property EBITDA by 9% to $686 million. Diluted earnings per share from continuing operations was up 27% to $0.62. The company did get an added punch from profits from the sale of Tower 3 of The Signature at MGM Grand.
More thoughts on Ameristar
Both Ameristar Casinos and Boyd Gaming reported earnings that fell shy of estimates. In general, I don't like to focus too much on earnings "hits" and "misses" because, in the grand scheme of things, they really don't matter much. For example, I've owned shares of Ameristar Casinos for over four-and-a-half years, and I can tell you that they miss earnings estimates all the time -- maybe three or four times over that span. And yet, over the long haul, the investment returns have been pretty good because the company makes money, it generates healthy returns on invested capital, and I got a pretty good price on the stock.
That's really all there is to it.
What's more important with these earnings misses are the factors behind them. We talked a bit about Ameristar yesterday. In addition to missing estimates, the company also sharply lowered its earnings guidance for the full year, calling for earnings of $1.25 to $1.29 per share rather than $1.41 to $1.49. About $0.04 of that was from a tax adjustment at the state level, and another $0.06 was from construction disruption and pre-opening expenses on newly announced projects at its St. Louis property to be included this year. Well, you can't really do anything about the tax adjustment, and taking the short-term hit to earnings guidance on the new projects is better than not having the projects done.
But the thing that really got me was another $0.04 reduction from "lower than anticipated growth" in its gaming markets. On the earnings conference call, management didn't really have much of an explanation for it, denying that it was related to caution because of the arrival of Pinnacle Entertainment's
Boyd Gaming, in fact, made a similar cut in outlook related to its Blue Chip riverboat property in Indiana, where the Native American-owned, land-based Four Winds casino and resort is set to open nearby.
As far as the "lower-than-anticipated growth," one of the markets Ameristar is probably referring to is Vicksburg, which reported a slight drop in net revenue for the quarter. The Vicksburg market had enjoyed heightened levels of business while much of the Mississippi Gulf Coast was out of commission. Now that most of the Gulf Coast is back online, much of that extra business has gone away. Perhaps because of the slower growth outlook, Ameristar has scaled back its $98 million expansion project in Vicksburg to include only 440 new gaming positions rather than 800, but over the same amount of space. The interesting thing about it is that the company is still spending the same $98 million that it intended to spend as of the Q1 earnings report, and says it still expects to generate the same level of return on that $98 million investment. In other words, it is the same investment on fewer gaming machines, but with the same return.
I'm still trying to figure that one out.
- Trump: Why No Dice?
- Gaming Roundup: WSOP, LVS, and ASCA
- The Ultimate Rule Maker: MGM Mirage
- The Future of the Mississippi Gulf Coast
- Is Buffett Right About Gambling?