What Wynn and Las Vegas Sands Have to Prove This Week

By Travis Hoium Markets Fool.com

Two of the biggest companies in gaming report earnings this week, and they'll give investors a peek into how the industry as a whole is doing right now. Wynn Resorts (NASDAQ: WYNN) starts things off on Tuesday, followed shortly after by Las Vegas Sands (NYSE: LVS) reporting on Wednesday.

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Both companies are based in Las Vegas, but each generates a majority of their revenue in Asia, where Macau is the center of the market. Here's what investors should look for this week.

Exterior of The Parisian in Macau. Image source: Las Vegas Sands.

Macau is the center of gaming

I recently highlighted that Macau is over four times the size of Las Vegas from a gaming revenue standpoint, and that's why it'll be the biggest market to watch.

We know that gaming revenue overall was up 13% in the first quarter, and that's the bar against which results should be measured. But we also need to keep in mind that supply is up, with Wynn Palace and The Parisian both opening within the past year. In other words, not every resort should be expected to grow 13% as the market gets diluted with more properties.

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What I'll be watching is the trend on the Macau Peninsula, where Sands Macau and Wynn Macau are located. I would expect the region to lose market share, but if revenue andearnings before interest, taxes, depreciation, and amortization(EBITDA) are flat, it'll be a big win for those resorts.

On Cotai, Wynn Palace will be the big disruption and will be an important resort to watch. In the fourth quarter, it generated $418.7 million in revenue and $77.5 million in EBITDA. I would expect both numbers to be up, but investors will be closely watching how much it grows. If it can pass $500 million in quarterly revenue and trend toward $500 million in annual EBITDA, it'll be a huge win for Wynn.

Wynn Palace's growth and the addition of The Parisian could cost Las Vegas Sands' older resorts in the region. In the fourth quarter, Venetian Macau and Sands Cotai Central's revenue and EBITDA both declined because of the increased competition. They'll want to hold as much ground as they can in the quarter. The Parisian will also want to see revenue increase from $344 million and EBITDA grow from $95 million in the fourth quarter.

What to watch in Las Vegas

In Las Vegas, I'll be looking more off the gaming floor than on it. In the three months ending in February, gaming revenue was up 2.2%, so we probably won't see the needle move much there.

Las Vegas has become more focused on non-gaming revenue from hotel rooms, restaurants, clubs, and other sources. Wynn is a leader in that space, and if revenue is up, I would expect it to be driven by non-gaming sources. Las Vegas Sands is highly dependent on hotel rooms, which generate more revenue than the casino, so watch what room rates and occupancy do in Las Vegas.

The Foolish bottom line

Wynn Resorts will need to prove that investors' recent bullishness after the opening of Wynn Palace isn't unfounded. So, if it can continue to grow, that'll be a good sign.

Las Vegas Sands will want to prove that it isn't losing market share and can generate enough cash to pay its dividend and fund growth plans (think Japan). Even flat results may be good enough for investors in Las Vegas Sands. We'll learn more about both stocks' trajectories later this week.

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Travis Hoium owns shares of Wynn Resorts. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.