Vegas Q3 Casino Stocks Take a Dive
Rachel Wimberly -- Tradeshow Week, 11/14/2008 1:36:00 PM
If the latest earnings reports from Las Vegas-based casinos are any indication, people are skipping the bright lights of Sin City for now.
According to the Las Vegas Convention & Visitor Authority’s Executive Summary for September, convention attendance dropped 10 percent to 357,525 from 397,348 in the same period last year.
That, and a 10-percent slide in visitor attendance, hit the pocketbooks of some of the biggest players in not only the casino, but also the convention and meetings market – Las Vegas Sands, Boyd Gaming and MGM Mirage – which all have posted third-quarter net income losses.
Las Vegas Sands, owned by billionaire Sheldon Adelson, has been hit by far the hardest and, at this point, may just be struggling for its very existence.
In the first week of November, the casino operator’s auditor said there were doubts about the company’s ability to continue. In less than a year, Sands’ stock has fallen from $122 last December to an all-time low of $4.32, posted on Oct. 28.
On Nov. 10, the company posted its third-quarter earnings, and the good news was revenue jumped 67.2 percent to $1.11 billion, compared with the same period last year. But net income was still a loss, $32.2 million, though it wasn’t as much of a loss as posted in the same period last year, which was $48.5 million.
William P. Weidner, Sands’ president and COO, said, “Our third quarter results reflect solid operating performance, with both revenues and adjusted property EBITDAR (Earnings before Interest, Taxes, Depreciation, Amortization and Rent) increasing substantially in both Las Vegas and Macau, despite challenging operating environments in each market.”
In an effort to calm fears that the company was on the verge of running out of cash, the Sands said it was in the process of raising $2 billion in capital to keep it afloat.
In the meantime, the company also announced it was suspending development projects in Las Vegas, Macau and Bethlehem, Pa.
Boyd Gaming also reported losses in the third quarter, with revenue dipping to $426.5 million, compared with $490.1 million in the same period last year, a 13-percent decrease.
Third-quarter net income also fell to $8.7 million from $31.9 million, compared with the same period last year, a 73-percent drop.
The company’s poor earnings report comes on top of other bad news when Boyd announced in August it was halting its $4.8 billion Echelon project for at least nine months because of a lack of financing.
MGM Mirage, too, had a turbulent third quarter, posting a net income loss of $61.3 million, compared with $183.8 million in the same period last year, a 67-percent decrease. One reason for the decline this quarter, according to the company, was because last year in the same quarter it received a one-time insurance payout related to losses incurred as a result of Hurricane Katrina.
Revenue also dipped 6 percent to $1.95 billion from $2.07 billion.
