Earnings season kicks off with high expectations from F1 for Wynn and MGM

January 22, 2024 8:42 PM
Photo: Shutterstock
  • Buck Wargo, CDC Gaming Reports
January 22, 2024 8:42 PM
  • Buck Wargo, CDC Gaming Reports

The gaming-industry’s fourth-quarter earnings’ season gets underway Wednesday when Las Vegas Sands holds its call with Wall Street analysts and one report suggests that the Formula One race will help Wynn Resorts and MGM Resorts beat estimates.

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During its earnings call, Zacks Equity Research reported Monday that Las Vegas Sands is likely to have benefited from higher visitation, higher hotel occupancy, and a spending increase in Macau and Singapore during the fourth quarter.

When it comes to Macau, Shaun Kelley, a research analyst with Bank of America Securities, said their fourth-quarter adjusted-earnings estimates are in line with Wall Street’s and they expect a slight beat for MGM and a slight miss for Wynn. “Investor sentiment is mixed, as improving gross-gaming-revenue trends and discounts to historical multiples are offset by China macro concerns and de-rating in China stocks,” Kelley said.

As for Singapore, Kelley said their estimate of $475 million for Marina Bay Sands is slightly ahead of consensus.

Zacks Equities Research sounded a positive note for Las Vegas Sands, saying executives are “quite optimistic” about growth opportunities in Macau where the company has invested $15 billion. The retail business is likely to have aided the top line in the quarter-to-be reported, the note said.

Zacks reported its model for Las Vegas Sands predicts net revenues for Venetian Macao, Londoner Macao, Parisian Macao, Sands Macao, and Marina Bay Sands to improve 251.5%, 407.7%, 376.1%, 511.7%, and 52.1% from the year-ago levels to $706.6 million, $472.2 million, $242.8 million, $104 million, and $1,037.1 million, respectively.

Their model also predicts Venetian Macao, Londoner Macao, Parisian Macao, Sands Macao and Marina Bay Sands property EBITDAR to be $294.6 million, $139.2 million, $88.2 million, $22.3 million, and $558 million. That implies a surge of 2,004.6%, 431.4%, 439.4%, 211.5%, and 104.4% year over year, respectively, Zacks reported.

A Bank of America note released Monday discussed the third-quarter gaming stocks’ underperformance of the broader market, driven by China macro concerns, tepid regional trends, rising cost pressures, and concerns on “comping the comp” in Las Vegas in 2024.

“Our fourth-quarter 2023 estimates are ahead of consensus in Las Vegas and largely in line in regionals and Macau,” Kelley said. “In Las Vegas, we expect beats for Wynn and MGM, as Formula 1 and baccarat drive high-end outperformance. We tweaked regional estimates slightly higher, as gross gaming revenue ended the year on a high-note, up 7% year over year, but overall our companies underperformed due to consumer weakness and competition.”

Caesars pre-announced Las Vegas fourth-quarter EBITDA of $486 million to $492 million, below prior estimates of $520 million, Kelley noted. BofA’s EBITDA estimates for WYNN/MGM are +8%/+4% above consensus, as they expect them to outperform Strip revenue per room and gross gaming revenue given their higher-end skew.

At regional properties, same-state gross gaming revenue improved through the quarter and Kelley said the outperformance in December was driven by favorable holiday timing and weather.

“We expect these trends to mean revert in January and we are already seeing declines in regional casino visitation,” Kelley said. “Overall, our regional revenue/EBITDA estimates are in line, but we expect slight beats for Boyd and Penn and a miss for MGM.”

Kelley wrote that despite unfavorable sports betting outcomes in November, “digital gaming growth is tracking 5% ahead of total market model driven by igaming growth exceeding expectations; online sports betting handle growth pacing ahead of expectations; and a better than anticipated launch in Kentucky.”

Kelley also sees an 11% gross-gaming-revenue upside for DraftKings in the fourth quarter.

“With the launch of ESPN Bet, Fanatics, and increased investment behind BetMGM, investors have concerns on promotions, but Pennsylvania state data shows industry wide promo as a percentage of handle (excluding ESPN Bet) is actually down 40 basis points year-over-year to 2.6%,” Kelley said.