While earnings season for Las Vegas casino operators gets underway in earnest Thursday with Boyd Gaming reporting fourth quarter results, one Wall Street analyst believes Las Vegas looks “less attractive” to investors than it did a year ago.
Chad Beynon, with Macquarie Equity Research, issued a note to investors Monday saying that based on fourth- quarter market data, he expects Las Vegas operators to show Strip segments that will report “in-line” fourth-quarter earnings.
“Over the past month, Vegas consensus EBITDA has declined roughly 4%, specifically MGM -2%, Wynn Resorts -8%, and Caesars Entertainment -1%,” Beynon wrote.
The key items for the quarter are Caesars’ fourth-quarter 2023 disruption at its Versailles tower and low hold; MGM lapping a $30 million EBITDA headwind from F1 and the fourth-quarter 2023 hold benefit of $70 million; and Wynn’s fourth-quarter 2023 including a $10 million hold, in addition to benefiting the most from the high-end F1 consumer of 2023, Beynon said.
“Overall, Vegas looks less attractive than this time last year, given negative industry/company growth in 2024. Our expectations are for this to continue in 2025, particularly first quarter 2025. We prefer mid-high portfolios, but also expect more mergers and acquisitions, given subdued REIT activity in 2024.”
Beynon cited the Strip generating revenue of $881 million in December, a 3% year-over-year decline, which they view as a slightly positive result against operator estimates.
“We view the monthly results quite positively, considering December included two fewer weekend days versus last year, in addition to facing a tough comp with December 2023 representing the highest-ever monthly gaming revenue achieved on the Strip,” Beynon said.
“Impressively, slot handle increased 1% year-over-year in December, but baccarat drop declined 4% year-over-year. December results affected a fourth quarter Strip gaming revenue decline of 3% year-over-year, which was an improvement from a 7% year-over-year decline in the third quarter of 2024. This compares to the broader U.S. regional casino same-store growth of 2% year-over-year in December and 1% year-over-year for the fourth quarter of 2024.”
On the non-gaming side, “Fourth-quarter Strip revenue-per-room growth came in at -8% year-over-year, given a tough November F1 comp, which was roughly in line with our expectations coming into the release.” Beynon added that based on fourth-quarter market data, Vegas Strip segments for MGM, Wynn, and Caesars are set to report in-line fourth-quarter earnings. Caesars doesn’t report until Feb. 25.
In December, Las Vegas locals gaming revenue was up 14% year-over-year.
“Based on fourth-quarter market data and 2024 earnings trends, we expect in-line performances from Red Rock Resorts, Golden Entertainment, and Boyd in Las Vegas and a beat for Boyd in the Midwest and South,” Beynon said.
As a reminder, the Durango Casino & Resort opened December 5, 2023, which should make the fourth quarter comparison a bit easier for competitor Boyd, Beynon said. “Nevertheless, we anticipate Boyd’s outperformance to come principally from its Midwest & South segment. For Red Rock Resorts, much of the call will be focused on the next phase of Durango, which management expects to cause $23 million of disruption in 2025.”
