First-quarter earnings season kicks off Wednesday for the gaming industry when Las Vegas Sands Corporation reports. Bank of America released a note Monday, saying their estimates are below consensus for Las Vegas and regional properties and above estimates for Macau.
BofA Analyst Shaun Kelley pointed out that since the fourth quarter, gaming stocks have underperformed the broader market, driven by negative estimate revisions on regionals and higher interest rates.
“The bottom line is our first-quarter 2024 estimates are slightly below the Street in Vegas, ahead in Macau, and slightly below in regionals,” Kelley wrote. “In Las Vegas, we expect a beat for Wynn Resorts, but are 5% below the Street for Caesars Entertainment. In Macau, we expect large beats for MGM Resorts International and Wynn, driven by share gains. In regionals, our estimates are in line with or below consensus.”
In Macau, Kelley said first-quarter estimates are 3% above the Street and by company, they expect beats for MGM and Wynn and a modest miss for Las Vegas Sands. “With market gross gaming revenue known, key for the quarter will be margin recovery and operating-expense base changes quarter over quarter and versus 2019, changes in market share, and the promotional environment.”
In Singapore, Kelley’s Marina Bay Sands estimate, $484 million, is slightly ahead of consensus at $477 million.
For Las Vegas, the Bank of America estimates are 1% below the Street. By company, they expect Wynn to beat estimates, MGM in line with estimates, and a miss for Caesars. Baccarat is up 47% year over year in the first quarter, which should drive outperformance at Wynn and high-end properties for MGM, Kelley said.
“We expect March to be challenging from Easter timing and lapping (the ConAgg trade show).” Baccarat may grow again in March on easy comps, providing further upside to our Wynn and MGM estimates.”
When it comes to regional properties, same-state gross gaming revenue was choppy during the first quarter, down 7% in January, up 2% in February, and down 1% in March so far, Kelley said.
“We think Caesars could miss estimates and we expect Penn National and Boyd Gaming to be largely in line. For Churchill Downs, we expect a modest beat in the live/historical segment driven by strength in Virginia horse racing machines. We expect additional updates on potential legislation limiting gray games in Virginia, excitement heading into the 150th Kentucky Derby, and any further update on the Rose opening in northern Virginia.”
In the online segment, Kelley said they were initially positive with their update, while March’s sport outcomes drove down the online sports betting hold. That could limit upside in the first quarter, he said.
“The mix may also be a factor for some NCAA-heavy operators. For DraftKings, we previously suggested a trend to $70 million net gaming revenue beat based on about 10% hold in March, but we see hold now trading closer to 7.5% and slightly below last quarter’s reported 9.2% on a weighted average basis. We now think DraftKings could come inline with our first quarter net gaming revenue estimate of $1.10 billion and approximately breakeven on EBITDA, but structural hold commentary and promotional cadence will be important.”
For ESPN Bet, Kelley said they expect a first-quarter EBITDA loss of about $200 million versus guidance of about $170 million. While March online sports betting data is limited, ESPN Bet seems to have held lower than the market, which could put a $65 million net gaming revenue estimate at risk.
