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Las Vegas Sands (NYSE:LVS) is expected to publish its Q2 2024 results around mid-July. We expect revenues to come in around $2.85 billion, about 11% higher than last year and marginally ahead of consensus estimates. Earnings are likely to come in at about $0.60 per share, and about 30% ahead of last year, driven by a rebound in activity in Macau and strength in the company’s Singapore business. So what are some of the trends that are likely to drive results?

Sands’ Macau business – which accounted for over 60% of the company’s pre-pandemic revenue – is seeing a strong rebound as China relaxed many of its intense Covid-19 restrictions in early 2023. Tourist arrivals at Macau have rebounded strongly and LVS is seeing strong pent-up demand. For example, for April, the most recent data available, Macau welcomed 2,600,717 visitors up 14.4% year-on-year and representing 76% of arrivals during the same month in 2019, before the Covid-19 pandemic. Moreover, spending has also been on the uptick driven in part by a higher mix of affluent customers and growth in the high-roller VIP segment. However, Sands has a higher exposure to the lower end of the market and it is possible that its growth could be lower compared to rivals such as MGM and Wynn who focus on the premium mass market. Las Vegas Sands’ Marina Bay Sands (MBS) property in Singapore remains the company’s biggest profit driver, as tourist inflows and spending in the country remain strong, with the property also likely benefiting from its new suite rooms. Adjusted Property EBITDA rose by about 52% to $597 million in Q1. We could see similar strength over Q2 as well.

LVS stock has faced a notable decline of 25% from levels of $60 in early January 2021 to around $45 now, vs. an increase of about 45% for the S&P 500 over this roughly 3-year period. However, the decrease in LVS stock has been far from consistent. Returns for the stock were -37% in 2021, 28% in 2022, and 2% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that LVS underperformed the S&P in 2021 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Discretionary sector including AMZN, TSLA, and HD, and even for the mega-cap stars GOOG, MSFT, and AAPL.

In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could LVS face a similar situation as it did in 2021 and 2023 and underperform the S&P over the next 12 months – or will it see a recovery?

We expect the company’s financial performance to continue to improve going forward as demand in Macau picks up further, with per-capita spending expected to grow. Things are likely to remain strong in Singapore as well, given the country’s reputation as a stable and high-value market. The company is in the process of investing about $1.75 billion into the Singapore property to help drive more high-value tourism. Las Vegas Sands’ liquidity position is also reasonable, with cash holdings standing at roughly $5 billion as of March 2024. That being said, there are risks as well. LVS is also quite highly leveraged, with $13.9 billion in total debt outstanding. There are also concerns about the Chinese economy, with the crisis in the real estate sector, and this could pose a risk for LVS. We value LVS stock at about $55 per share, which is about 31% ahead of the market price. We will be revisiting our price for the stock post-Q2 earnings. See our analysis of Las Vegas Sands valuation for more details on what is driving our price estimate for the stock.

[1] Returns as of 7/4/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.