Published on: October 29, 2024, 04:39h.
Last updated on: October 29, 2024, 04:39h.
Following a lukewarm September reading of Nevada gross gaming revenue (GGR), some analysts believe Las Vegas Strip casino operators may not have significant room for positive surprises in the fourth quarter.
In a recent report, Macquarie analyst Chad Beynon mentioned that more challenging year-over-year comparisons suggest that Strip revenue for the current quarter is likely to match Wall Street estimates without exceeding them significantly. In the previous month, Strip operators generated $728 in revenue, a decline from the previous year due to bad baccarat luck and September having one less reporting day compared to 2023.
With the consensus for Vegas decreasing by approximately 2% in the past month, it is now expected that Vegas segments will meet the consensus,” Beynon commented. “We are optimistic about the non-gaming prospects in Vegas, given the strong group travel and events calendar, but we are becoming more cautious about the slowdown in leisure travel demand, which could lead to a more competitive promotional environment and impact Vegas margins.”
Comparisons for the current quarter and the first three months of 2025 could be challenging to surpass due to the decreased enthusiasm for the Las Vegas Grand Prix compared to last year, as well as the Super Bowl being hosted in New Orleans in February 2025 instead of Las Vegas, as highlighted by Beynon.
Caesars Demonstrates Risks of Difficult Comparisons
Caesars Entertainment (NASDAQ: CZR) reported third-quarter results after the close of US markets today, leading to a decline in the stock price during after-hours trading as the company announced a 4% decrease in revenue to $2.87 billion.
The challenging year-over-year comparisons in both the Las Vegas and regional casino segments were evident in this decline. Caesars is the first among gaming companies with large portfolios in both the Strip and regional locations to report results for the most recent quarter, highlighting the trend of difficult comparisons to watch this earnings season.
Regarding Caesars specifically, the company’s fourth and first-quarter performances may benefit from recent Taylor Swift concerts in New Orleans and the upcoming Super Bowl in that city. Beynon has an “outperform” rating on Caesars with a $50 price target.
In Nevada, Caesars likely saw some benefit from the growth in September GGR in Reno, offset by an 8% year-over-year decrease in Laughlin. The company is a major player in both markets.
Strong Performance in Las Vegas Locals Segment
Although September GGR growth was lackluster on the Strip, the Las Vegas locals segment continued to thrive, with a 15% revenue increase. This could be attributed to new venues like Red Rock Resorts’ (NASDAQ: RRR) in Southwest Las Vegas and heightened promotional activities among smaller independent casinos.
Many customers of local gaming venues are employees of Strip casinos, indicating that while revenue growth may be slowing on the Strip, it is not declining at an alarming rate.
“The positive results in the Las Vegas locals segment are encouraging for Red Rock and, to a lesser extent, Golden Entertainment (NASDAQ: GDEN),” Beynon added.