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Bull of the Day: Las Vegas Sands (LVS)

Eric Dutram

Although the consumer market has had a pretty mediocre year, the gaming sector has actually done pretty well and is one of the sector’s leaders. The space, as represented by the gaming ETF (BJK), has gained about 15% this year which easily outpaces the consumer discretionary sector at large for the time frame.

This may come as a bit of a surprise to some investors, but if you consider the stronger economic trends in place in the domestic economy, then it becomes less of a shock. Lower rates of joblessness, slightly stronger wage growth and booming consumer confidence are all combining to make consumers feel a bit better about their situations as of late, which is great news for the gaming market. No wonder the industry currently has a top 25% industry rank and is poised for more gains in the months ahead.

However, the real winners in this space also have big foreign operations, as the Chinese market is seemingly back on track after months of worry over a dreaded ‘hard landing’ in the country. But that has not come to pass and investors are quickly embracing companies with big exposure to consumers in this market too.

These factors make for an excellent environment for companies like Las Vegas Sands (LVS) which not only has a big domestic presence, but has significant holdings in Asia as well. That is part of the reason why LVS has been able to thoroughly crush not just the consumer discretionary sector, but the gaming space at large too so far in 2016.

But although LVS has surged for much of 2016, it may actually have plenty of room left to run higher. This is evident if we look to recent earnings estimate revisions from analysts who track the stock.

Recent Estimates

Shares of LVS have seen nearly universally rising estimates over the past thirty days, including six estimates higher for the current quarter compared to zero lower, and then seven higher for the current year compared to zero lower. These moves have also had a big impact on the consensus estimate for Las Vegas Sands, pushing this key metric to fresh highs.

In fact, the current quarter consensus estimate has increased by nearly 8.5% in the past thirty days, and the current year consensus estimate has added 6.85% in the same time frame. Meanwhile, the long term picture is also looking more impressive, as the consensus estimate for the following year has increased by about 7.6% in the past month too.

LAS VEGAS SANDS Price and Consensus

LAS VEGAS SANDS Price and Consensus | LAS VEGAS SANDS Quote

If investors also add in the company’s recent earnings beat—in which they beat estimates by about 22%-- it becomes clear that LVS has a promising trajectory in its near future. No wonder the stock has earned itself a grade of ‘B’ for momentum, and a Zacks Rank #1 (Strong Buy) rating too.

Other Factors: Macao Expansion

But beyond these promising numbers, investors should also note that Las Vegas Sands just had the debut for a massive expansion to its Chinese operation, the Parisian Macao. This new expansion adds another 3,000 rooms to its Chinese division, along with about 450 table games and 2,500 slots/electronic table games.

In just the first few weeks of the property’s operation, it saw $1.1 million in adjusted EBITDA per day and occupancy of 87.5%, according to Las Vegas Sands company statistics . And with Las Vegas Sands’ Macao division seeing about 15% growth y/y in adjusted property EBITDA for the most recent quarter, it looks like this market is surging back, making this an optimal time to launch a new expansion, something that should benefit investors for months to come.

Bottom Line

The overall market appears to be very strong for the gaming industry, both at home and abroad. The domestic economy strength is underpinned by a more optimistic consumer, while a Chinese economy that is expanding at a robust clip with a growing manufacturing sector is keeping the bears at bay for that nation too.

This makes for a great environment for companies like LVS which has exposure to both countries, and we have seen that in the company’s share price as of late too. But with a solid economic picture, a recent earnings beat, and a new casino that just opened in Macao, this appears to still be a solid bet to close out the year, and into 2017 as well.

Now, which stocks should you sell?

As a Zacks Rank #1 Strong Buy, this Bull of the Day deserves consideration. But today there are 220 Zacks Rank #5 Strong Sells that demand even more urgent attention. If any of these are lurking in your portfolio, you should consider removing them immediately. Since 1988, such stocks have actually performed more than 11X worse than the S&P 500. See all Zacks Strong Sells and Strong Buys absolutely free >>

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