What Las Vegas Sands' strong earnings report tells us about Wynn Resorts

Published Thu, Oct 19 20233:26 PM EDT

A rebound in spending by Chinese travelers helped Las Vegas Sands ' (LVS) deliver a strong quarter on Wednesday. It should help Club holding Wynn Resorts (WYNN), too. Las Vegas Sands announced better-than-expected revenue and earnings that were in line with estimates. More importantly, the casino operator posted $1.12 billion in third-quarter adjusted property EBITDA — a key metric of profitability in the gambling industry — that beat the Street consensus. Despite its name, Las Vegas Sands only operates casinos in Singapore and Macao, and its results are seen as a good read on the health of the Chinese consumer and tourism in Asia. For the quarter, Macao's EBITDA came in at $631 million, at a 35.5% margin, a 210-basis point increase versus the prior quarter. Shares of LVS stock rose 3.5% higher to $46 per share Thursday on the news. Wynn stock gained 2.4% to $88 apiece. WYNN YTD mountain WYNN stock year-to-date performance. To be sure, Macao hasn't fully bounced back. Visitors to the region are still about 15% below pre-pandemic levels. But the company said its occupancy in the third quarter was 96% higher than it was before the Covid lockdowns. It is also bringing in more sales per visitor. Recovery of travel and tourism spending in Macao continued during the third quarter. The company noted that total market for gaming hit $5 billion in revenue, about 92% of sales in the third quarter of 2019. "A relevant question is can the market grow to $30 billion, $35 billion, $40 billion of GGR and beyond? We are firm believers that it will and may occur in much shorter timetable that anyone realizes," CEO Robert Goldstein said. The Macao bounce back is also great news for Wynn, which reports third-quarter earnings on Nov. 8. We continue to see Club holding Wynn as a huge beneficiary of China's reopening since it gathered about 70% of its pre-Covid revenues from its operations in Macao. Wynn Resorts' portfolio of Macao properties generated adjusted EBITDA of $246 million in the second quarter and recovered to 72% of pre-Covid levels and beat estimates of $225 million for the period. During its last earnings webcast on Aug. 9, management said gross gaming revenue momentum in Macao continued into Q3. Vegas is an important part of Wynn Resorts' story as well. The market may be concerned about the durability of consumer spending on areas like travel, but key events like the next SuperBowl and the inaugural Formula 1 race in Vegas should keep the town buzzing in the months ahead. (Jim Cramer's Charitable Trust is long WYNN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

The new Wynn casino and hotel, Macau, China.

Bob Henry | Universal Images Group | Getty Images

A rebound in spending by Chinese travelers helped Las Vegas Sands' (LVS) deliver a strong quarter on Wednesday. It should help Club holding Wynn Resorts (WYNN), too.