Las Vegas Sands Misses Earnings: Buying Opportunity?

The Rundown➢ Sales during the second quarter of 2014 increased 11.8% to $3.62

billion. The number was below analyst’s forecasts of $3.81 billion on average.

➢ Adjusted earnings per share came in at $0.85, a strong increase of 30.8%, but below forecasts of $0.90 per share.

➢ Weak performance in the VIP market was the main headwind during the quarter. This is due to reduced VIP gaming demand in China because of changing regulations and economic uncertainty.

➢ Should you buy Las Vegas Sands on short-term weakness or is it better to stay away from the company before things continue deteriorating?

Still Growing Strongly

Source: Las Vegas Sands.

Weakness Was Concentrated in the VIP Market

Source: Las Vegas Sands.

Outperforming the Competition“Our growth gaming revenue was up 12% versus the market that was up 5%. Two points to note here, firstly, our mass table and club revenues continue to grow ahead in the market. Secondly, during the period when VIP is experiencing a slowdown, our business makes us clearly more defensive than the overall market, as we have a much higher proportion of our growth gaming revenue on mass market revenue.”

-- Sheldon Adelson, chairman and CEO

Source: Las Vegas Sands.

The Mass Market Is the Main Growth Driver in Macao

Source: Las Vegas Sands.

Macao Mass Market Keeps Firing on All Cylinders

Source: Las Vegas Sands.

Strong Growth and Market Leadership in Macau

Source: Las Vegas Sands.

Source: Las Vegas Sands.

Sales: Las Vegas Sands vs. Melco Crown and Wynn Resorts

Valuation: Las Vegas Sands vs. Melco Crown and Wynn Resorts

Data Source: FinViz.

Foolish Takeaway➢ Las Vegas Sands reported lower-than-expected sales and earnings;

however, weakness was concentrated in the VIP segment.

➢ The company is still generating solid financial performance, and it has ambitious growth projects in Macau. Las Vegas Sands is also exploring opportunities in Japan, South Korea, and Vietnam.

➢ When compared to competitors such as Melco Crown and Wynn Resorts, Las Vegas Sands looks attractive in terms of growth and valuation.

➢ Buying the dip in Las Vegas Sands looks like a winning bet in the long term.

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