March 18, 2013
Recommendation: D-rated Sell
Welcome to the Stock of the Day for March 18, 2013. Over the past few months, casino and resort operators like Las Vegas Sands Corp. (LVS) have been on a tear. With LVS going ex-dividend tomorrow, let's see if it's worth taking a gamble on this stock.
Company Overview: The Las Vegas Sands Corp. is, as its name suggests, a major player in the Las Vegas gambling and entertainment scene. The company operates the Venetian hotel in Las Vegas, which offers a 120,000-square-foot casino and a 4,000-room suite hotel, as well as a shopping, dining and entertainment complex. The company also operates The Palazzo Casino and Sands Expo Center trade show and convention center. Outside of Sin City, the company is also expanding operations in Spain, Macao and Singapore.
Dividend Buzz: LVS goes ex-dividend tomorrow, March 19. That means that today's shareholders will receive $0.35 per share on March 29. Notably, LVS recently hiked up its quarterly dividend by 40%, but as I'll discuss shortly, the stock's 2.6% yield isn't enough to entice me to buy. And here's why:
Competition Breakdown: When it comes to casinos and resorts, the competition is fierce. As it stands, Las Vegas Sands competes with the likes of Caesar's Entertainment Corp. (CZR), MGM Resorts International (MGM) and Wynn Resorts Ltd. (WYNN). And while Las Vegas Sands dwarfs the others in terms of market cap, Caesars Entertainment Corp. is the current favorite of institutional investors, as shown by its stronger Quantitative Grade. On top of this, Caesar's has the strongest earnings prospects of the four, which profits expected to grow nearly 30% this quarter. (As for Las Vegas Sands, its bottom line is expected to actually shrink this quarter.) Granted, CZR is still a hold, but it still outperforms the other three, which are all D-rated sells.
Current Ratings: Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. This time last year, LVS was a B-rated buy. However, the Moderately-Aggressive stock has fallen in my rating system since then, as institutional investors have taken their money elsewhere. So buying pressure has grinded to a halt; this is reflected by the stock's D-rated Quantitative Grade. And when it comes to fundamentals, the picture isn't much better. Right now, LVS receives decent marks for sales growth, return on equity and analyst earnings revisions. However, the company is struggling in terms of operating margin and earnings growth and its cash flow and track record of beating analyst estimates are downright abysmal. So LVS receives a C for its Fundamental Grade.
Bottom Line: As of this posting, March 18, 2013, I consider LVS a D-rated Sell.