On Thursday, Citi adjusted its outlook on Las Vegas Sands Corp (NYSE:LVS), reducing the price target on the company's shares to $64.50 from $70.00, while reaffirming a Buy rating. The modification follows Las Vegas Sands' third-quarter earnings, which revealed a mixed financial performance.
The company's Macau operations reported earnings before interest, taxes, depreciation, and amortization (EBITDA) of $585 million, surpassing the consensus estimates. This strong performance was bolstered by a positive response to the phased opening of the Londoner Grand, contributing to the EBITDA recovery story in Macau.
Additionally, the firm announced an increase in its expected dividend per share for fiscal year 2025 to $1.00, up from $0.80 for fiscal year 2024, which was received well by the market.
Despite these positive developments, Las Vegas Sands' overall third-quarter property EBITDA of $991 million fell short of expectations, approximately 9% below forecasts. The shortfall was primarily attributed to a lower VIP hold rate of 1.75%, compared to 3.85% in the same quarter of the previous year, and a roughly 20% year-over-year decline in VIP volumes at Marina Bay Sands (MBS).
Looking ahead, Citi analysts anticipate that MBS will significantly enhance its competitiveness with the opening of the MBS Integrated Resort 2 (IR2) expected in 2031. However, the firm also announced an increase in its capital expenditure budget to $8.0 billion, up from the previous estimate of $3.3 billion.
While the return on invested capital (ROIC) is still projected to be in the teens, the heightened capex forecast may be perceived unfavorably by investors.
In light of these factors, Citi has revised the price target for Las Vegas Sands to reflect the new capital expenditure guidance. Despite the reduced target, Citi maintains a positive outlook on the company, citing the recovery in Macau and the stable operating cash flows from MBS.
In other recent news, Las Vegas Sands Corp reported lower-than-expected earnings and revenue for the third quarter. The company's quarterly profit was $0.44 per share, falling short of the average analyst projection of $0.53 per share. The total quarterly revenue decreased by 4%, to $2.68 billion, which was also below the anticipated $2.78 billion estimated by analysts.
These recent developments were influenced by a sluggish performance in Macao and Singapore. The ongoing renovations at the Londoner casino in Macao and a decline in per table income in Singapore were cited as significant factors. The company's CEO, Robert Goldstein, noted that visitation to Macao remains below pre-pandemic levels.
In addition, Las Vegas Sands Corp announced an additional $2 billion in future share repurchases and raised the annual dividend to $1.00 per share for 2025. This follows a recent activity where the company repurchased $450 million of its common stock during the quarter.
However, despite these actions, the company's Macau properties continue to face challenges amid a broader slowdown in growth for its integrated resorts and casino business.
InvestingPro Insights
Las Vegas Sands Corp (NYSE:LVS) continues to demonstrate financial strength despite the mixed third-quarter results. According to InvestingPro data, the company boasts impressive gross profit margins of 76.91% for the last twelve months as of Q2 2024, aligning with Citi's positive outlook on the company's recovery in Macau. This is further supported by an InvestingPro Tip highlighting LVS's "impressive gross profit margins."
The company's financial health is also reflected in its strong revenue growth, with a 68.48% increase over the last twelve months as of Q2 2024. This growth trajectory supports Citi's optimistic view on LVS's future performance, particularly with the anticipated opening of MBS Integrated Resort 2.
Another InvestingPro Tip notes that LVS "operates with a moderate level of debt," which could be advantageous as the company increases its capital expenditure budget. This financial flexibility may allow LVS to pursue growth opportunities while maintaining a stable financial position.
For investors seeking more comprehensive analysis, InvestingPro offers 7 additional tips for Las Vegas Sands, providing a deeper understanding of the company's financial landscape and potential investment opportunities.
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