Second-quarter earnings for the gaming industry kick off Tuesday when Red Rock Resorts reports how its Las Vegas casinos are faring, while Las Vegas Sands on Wednesday updates Macau and its gaming-license application in New York. Monarch Casino & Resort also reports on Wednesday, while Boyd Gaming and Churchill Downs do so on Thursday.
Big Strip operators Caesars Entertainment and MGM Resorts International will report July 30 and 31, respectively. Bally’s Corp. will update its Las Vegas and Chicago projects on July 31. Wynn Resorts hasn’t announced a reporting date.
Jefferies Equities Research analyst David Katz in a note to investors over the weekend highlighted what to look for in each earnings report and predicted that Resorts World and MGM have the inside track for New York gaming licenses.
“Several months after a state court invalidated the original 99-year lease that would allow Las Vegas Sands to control the Nassau Coliseum, the company received unanimous approval from the Nassau County Planning Commission for another 42-year lease,” Katz wrote. “Although there is vocal opposition from the community against casino development in Nassau County, it appears that Las Vegas Sands will be able to proceed with its initial proposal. In our view, MGM and Resorts World have potentially the strongest probability of winning licenses in New York, while the third recipient is more open and the entire process is fluid given the regulatory landscape in New York.”
Joseph Greff, analyst with J.P. Morgan, lowered estimates for Las Vegas Sands’s Macau property level EBITDA forecast to $574 million from $599 million.
“We assume 23%-ish gross gaming revenue market share for LVS in the second quarter,” Greff said. “We also assume slightly lower non-gaming revenues and lower sequential EBITDA margins versus our prior assumptions and can see a range of second-quarter EBITDA outcomes of $570 million to $595 million, and are moving to the bottom of this range. Our estimate change reflects the significant renovation disruption at the Londoner and a slightly lower level of market-wide gross gaming revenue in June.”
J.P. Morgan is bumping the second-quarter Marina Bay Sands’s property level EBITDA estimate to $494 million, up from its prior $463 million estimate. Greff said it was probably too conservative, given solid overall international tourism trends and increasing Chinese visitation.
“We think it is still months away (October) for Las Vegas Sands to see an LVS-specific positive inflection point in Macau, which is when Londoner construction disruption starts to ease more meaningfully, laying down a foundation for a nice Londoner ramp and what likely drives above-peer EBITDA growth in Macau,” Greff said. “We continue to believe that Singapore remains healthy and see capex here driving medium- to longer-term EBITDA growth. In terms of capital return, we see LVS in steady share repurchase mode in the neighborhood of $500 million per quarter.”
Here’s what Katz says to look for this week.
Las Vegas Sands will update the expected path toward full recovery in Macau and gaming revenue improvement in July. There will be a discussion on macro conditions in China and the impact on play levels and progress of renovations at The Londoner and Marina Bay Sands.
Red Rock will update the Durango performance, progress on the next large-scale project that includes a Durango expansion, and its Inspirada project in suburban Henderson. They will also discuss Las Vegas locals gaming trends and competition.
Boyd will discuss competitive pressures in regional markets and Las Vegas, commentary on regional gaming trends that were weak in the first quarter, capital spending, especially at Sky River Casino, and capital strategies and boundaries for mergers and acquisitions since reports surfaced about an acquisition of Penn Entertainment.
Monarch will talk about its current growth strategy and potential for mergers and acquisitions, current trends on Black Hawk and Reno markets, and the progress of capital upgrades for Atlantis Casino Resort.
Churchill Downs will update the 150th Kentucky Derby week and capital projects, regional gaming trends that have been choppy this year but stronger of late, Kentucky and Virginia gray games and competitive landscape, and Exacta and its long-term earnings power.
