By Sean Geary
Gaming company Las Vegas Sands (LVS) reported both its quarterly and annual results Wednesday afternoon; the firm had massive profits, thanks to strength from its casinos in Macau. The company earned $434.8 million, or 53 cents per share for the quarter, up from $320.1 million, or 39 cents per share, in the same period last year. Fourth quarter net income jumped 35%. Sands China, the company’s Macau division, saw its quarterly profits jump 52% and revenues jump 48%.
After a relatively tough year in 2012 when Asian economies slowed, the company’s recent performance in Macau is indicative of a rebounding Chinese consumer as the Mainland economy (FXI) continues to strengthen. As we’ve noted here at Emerging Money, casino stocks are well poised to take advantage of Chinese consumers with discretionary income.
While many Macau-based casinos have concentrated most of their efforts the on lucrative VIP segment, Las Vegas Sands has diversified operations by trying to target the mass market in addition to high-rollers.
In addition to its incredibly successful Venetian complex, the company’s newest offering, the Sands Cotai Central, attracted more than three million visitors in 2012. With the company’s plans to build a Paris-themed casino, Las Vegas Sands should be able to maintain its pole position in the mass-market segment of Macau gaming.
After beating estimates, Las Vegas Sands’ stock jumped 5% after-hours. While the company remains reasonably valued, trading at roughly 17 times forward earnings, the stock has been on quite a run recently: Las Vegas Sands is up 15% over the past month and 40% over the past six months.
Although the company remains a compelling long-term story, the stock has traded consistently for the past few years. The stock has previously found strong resistance in the 55-62 range, frequently pulling back before finding support in the low 40s or high 30s.
If the stock were to break through 62, Las Vegas Sands could trade much higher; however, an inability to get above 62 could be a signal that the stock will eventually move back down to previous support when a new long position offers a more favorable risk/reward proposition.
Disclosure: Author and family are long LVS; author may sell covered calls in the next 72 hours.