Weak Macao operations keep Las Vegas Sands bearish

Last week, casino operator Las Vegas Sands (NYSE: LVS) reported an increase in fiscal 2017 first-quarter revenues and earnings, compared to the same period of 2016. However, the stock declined as the revenue missed analysts’ estimates. A look at the first-quarter results reveal few other issues faced by the company, as explained below. Thus, we forecast the stock to remain bearish in the short-term.

The Las Vegas-based company reported Q1, FY17 net income of $480 million, or $0.60 per share, on revenues of $3.11 billion. In the first-quarter of 2016, the resort operator posted net income of $320 million, or $0.40 per share, on revenues of $2.72 billion.

In the quarter ended March 2017, Casino revenues increased $322 million y-o-y to $2.404 billion. Similarly, room revenues were $406 million, an increase of $40 million from Q1 2016. During Q1 2017, Food and beverage revenues increased to $213 million, from $188 million in the similar quarter last year.

KTNV Channel 13 Las Vegas

Excluding charges, Q1 2017 adjusted net income was $527 million or $0.66 per share, compared to $375 million or $0.47 per share in Q1 2016. Analysts’ had anticipated earnings of $0.62 per share on revenues of $3.12 billion.

Even though the earnings beat estimates, the Macao operations were not impressive. The Venetian Macao Q1 revenues declined $8 million y-o-y to $741 million. The hotel occupancy rate increased about 9% y-o-y to 86.5%. However, the average daily room rate fell to $209, from $226 last year.

Sands Cotai Central reported Q1 revenues of $467 million, down $63 million from the first-quarter last year. While the occupancy rate increased 2% to 79.4%, the average daily room rate decreased to $155, from $150 a year ago.

Likewise, Parisian Macao and Four Seasons Hotel revenues declined $26 million and $5 million to $318 and $143 million, respectively. Sands Macao revenue was $182 million, up $7 million from last year. However, average room rate fell to $195, from $207 in 2016. Macao is the gaming capital of the world. Thus, lackluster revenues from Macao operations are expected to keep the stock weak in the short-term.

The stock is moving along a declining trend line, as shown in the image below. Additionally, the stock has failed to cross the major resistance at 59. The MACD oscillator has made a bearish crossover below the zero line. Thus, situation favors further decline in the stock price.

One of the simple methods to trade a downtrend is by investing in a low or below option from a binary broker who offers a weekly expiry contract. To ensure better chances of success, the option should be picked when the stock of Las Vegas trades near $58 in the NYSE.

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