Macau Drags Las Vegas Sands to Profit Miss
Las Vegas Sands
(LVS) - Get Report
widely missed first-quarter earnings estimates after the market close Wednesday because of disappointing Macau casino results, pointing to the competitive nature of the world's largest gambling market.
While many investors had been fretting about the company's Las Vegas properties because of the weak U.S. consumer, the Macau results surprised investors.
The stock fell 7.2% to $70.75 in recent after-hours trading Wednesday.
"Macau looks awful. Vegas does look better than I would have thought, but they still missed on every property metric," says a buy-side analyst who follows the casino sector.
Overall, Las Vegas Sands reported adjusted net income of $23.6 million in the quarter, or 7 cents a share, compared with profit of $114.6 million, or 32 cents a share a year earlier. Management blamed increased operating costs and interest expenses for much of the profit decline.
Revenue rose 72% from a year ago to $1.08 billion.
The bottom- and top-line numbers were worse than analyst expectations for adjusted EPS of 36 cents on $1.24 billion in revenue, according to Thomson Financial.
On a property basis, the Venetian Macau contributed $110.3 million of adjusted cash flow (earnings before interest, taxes, depreciation and amortization). Analysts were expecting $137 million of EBITDA at the property, which opened in August last year, according StreetAccount. The property's "whisper number," which is the unofficial estimate passed from sell-side analysts to money managers on Wall Street, was $120 million, according to the buy-side source.
In its release, management said VIP volumes at the property "were down sequentially due to the increasingly competitive environment that has developed in this market over the last few months."
This was likely a subtle reference to competitor
Melco PBL's
(MPEL)
decision to raise junket commissions in December to bring guests to its Crown Macau property in an attempt to dominate the VIP gambling market.
In Las Vegas, results were mixed and slightly missed official analyst estimates. Overall property EBITDA increased 9.3% to $122.6 million, driven mostly by the opening of the company's second property, The Palazzo, at the end of 2007.
Analysts expected $130 million at the two properties, according to StreetAccount, but the whisper number was $120 million, the industry source says.
A key hotel operating metric, revenue per available room, fell 8.4% from a year earlier at The Venetian Resort Hotel Casino in Las Vegas.