Tickers in this Article: LVS, MGM, WYNN, BYD, MPEL
Las Vegas Sands (NYSE:LVS) reported increased year-over-year revenue and earnings for its first quarter, but the stock was greeted negatively by the market as the casino operator failed to meet expectations.

TUTORIAL: Basic Financial Concepts

The Quarter Looks Good, But ...
Las Vegas Sands reported adjusted earnings per diluted share of 37 cents compared to 7 cents in the first quarter last year. On a GAAP basis, the EPS was 28 cents versus a loss of 4 cents in last year's quarter. Room revenue grew while occupancy rates failed to keep pace. GAAP net income was $228 million compared to a loss of $28.9 million in the quarter a year ago. With the analyst estimate of adjusted EPS at 44 cents, the market threw in the chips on Sands for the miss as the stock plunged more than 16%. (To learn about financial statements, see 12 Things You Need To Know About Financial Statements.)

Bad Luck For Some
While Sands stock was smashed as its report was chewed up and spit back out by the market, MGM Resorts International (NYSE:MGM) pleased the market, reporting better than expected results. Last month Wynn Resorts (Nasdaq:WYNN) also delivered an earnings report on the positive surprise side, with room revenue up. Boyd Gaming (NYSE:BYD), on the other hand, lost $3.5 million due to higher costs, while Melco (Nasdaq:MPEL) reports later this month.

More On Sands' Results
Sands' key investment in China through its owned subsidiary, Sands China Limited, had its Macau Resorts segment post 22.6% year-over-year revenue growth, bringing in $1.16 billion. The gaming-friendly policies of the government helped the casino industry achieve record results. Sands' Venetian Macau increased revenue 16.1%, Sands Macau was up 13.7%, while Four Seasons Hotel and Plaza Casino shot up 68.1%. Consolidated adjusted property EBITDA was $745.7 million compared to $371 million in the year ago quarter. So what was the market stewing about? (To learn more, see A Clear Look At EBITDA.)

Investors' Concerns
One glaring issue for Sands is the sequential quarter results. While the EBITDA surged year-over-year, it was up only slightly from the previous quarter (Q4 2010). Likewise, the sequential breakdowns of the Sands' properties weren't well received. If you aggregate the four major Sands properties, the EBITDA for Q1 is $670.3 million versus $715.4 million in the previous quarter. With the exception of the Four Seasons, the other major properties, including Marina Bay in Singapore as well as Venetian Macau and Sands Macau, along with Sands' Las Vegas properties, produced an EBITDA that was down this quarter from last.

What Investors Want To See
In a word, what investors want to see is growth. They are focused on the negative sequential quarter performance as an indicator of an unpleasant potential trend. Balanced against this are the impressive year-over-year results, along with what the management of Sands points out is its record quarterly revenue. Thus, investors have a bear-bull tug of war going on with Sands.

What's An Investor To Do?
Part of the debate on Sands' prospects depends how investors see the Asian growth. If it starts to slow, this of course slows the growth of Sands. If investors want to step back a bit, though, the revenue growth and expansion of Sands has been notable, from $2 billion to $6.5 billion from 2006 through 2010. Earnings have been up and down, with two losing years, 2008 and 2009. Growing pains? Perhaps, but maybe the growth of the company and the stock is just taking a break.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

comments powered by Disqus

Trading Center