Las Vegas casinos warn investors on potential coronavirus impact

Las Vegas resort operators’ stock prices are plunging amid the global coronavirus sell-off.

The World Health Organization declared the outbreak a public health emergency of international concern Jan. 30. MGM Resorts International shares have fallen 21.5 percent since Jan. 30. Meanwhile, Las Vegas Sands Corp. shares fell 11.9 percent, Red Rock Resorts shares fell 17.5 percent, Boyd Gaming Corp. fell 13.5 percent, Caesars Entertainment Corp. fell 7.8 percent and Wynn Resorts Ltd. shares fell 14.7 percent.

The Dow Jones Industrial Average fell 12 percent in that same time frame.

Macquarie analyst Chad Beynon said it’s hard to assess the potential impact the virus could have on gaming companies because nobody knows the depth of the crisis.

“The market, in our view, has moved from underappreciating the risk to potentially over-penalizing the stocks,” Beynon said.

Casino operators have said they will continue to monitor the situation and have warned investors that the COVID-19 outbreak could have an adverse effect on operations.

An annual report from Wynn filed Friday said the outbreak “has had and will have an adverse effect on our results of operations.”

Other annual reports echoed the sentiment.

“The extent to which the coronavirus impacts the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted,” according to MGM’s annual report, filed Thursday.

Sands’ annual report said that if the virus escalates, it could impact company subsidiaries’ ability to generate sufficient earnings and cash flow to pay dividends.

Caesars said in its annual report that business may be “adversely affected” by the outbreak if it leads to “business disruption, reduced customer traffic and reduced operations.”

The coronavirus had hit the three Las Vegas-based operators with their presence in the Chinese territory of Macao, which enforced a 15-day casino shutdown to curb the spread of the virus. The casinos were allowed to reopen last week.

Wynn CEO Matt Maddox told investors the shutdown cost the company between $2.4 million and $2.6 million a day. MGM said it was losing around $1.5 million of operating expenses a day across both of its properties, mostly payroll related, during the shutdown. And Sands’ six casinos in the region saw a major dip in visitation before the shutdown.

MGM resumed operations in Macao on Feb. 20, but they aren’t back to normal just yet.

MGM’s annual report said there are limits on the number of gaming tables allowed to operate and restrictions on the number of seats at each table. The properties are also facing a temporary suspension on the visa scheme and ferry service to Macao.

Representatives for MGM, Boyd, Red Rock and Sands declined to provide comment for this story. Caesars spokesman Richard Broome did not return a request for comment.

Wynn spokesman Michael Weaver referred to comments Wynn CEO Matt Maddox made in the company’s earnings call earlier this month, in which Maddox said the company feels “like things are fairly well contained, and we’re just watching it very carefully.”

Near-term impacts

Mark Hamrick, the senior economic Analyst for Bankrate.com, said he’s confident the market plunge will end at some point — he’s just not sure when.

“This jolt is a bump in the road that will eventually only be a memory,” he said in a Friday statement. “We cannot be confident of the depth or duration of the market’s decline or the economic impacts in the short-term.”

SunTrust Robinson Humphrey analyst Barry Jonas said the first quarter is looking strong for gaming companies, and management teams “continue to emphasize no discernible impact to forward-looking booking trends so far.”

Caesars CEO Tony Rodio said earlier this week that the company “has seen no business impact whatsoever” from the virus outbreak, and Red Rock’s Executive Vice President, CFO and Treasurer Stephen Cootey said Feb. 4 that “we really haven’t seen any impact from the coronavirus.”

Even so, Jonas said in a Friday note that he expects the coronavirus headlines to dictate share price movements in the near-term.

He added that “the situation warrants monitoring” to see if the Centers for Disease Control and Prevention makes more announcements, or if new cases in the U.S. begin to impact consumer or corporate travel decisions.

More than 83,000 people globally have contracted the illness, leading to more than 2,800 deaths. There were at least 60 cases in the U.S. as of Friday afternoon.

MGM shares closed down 3.8 percent to $24.56 on Friday. Wynn shares closed down 2.9 percent to $107.98. Caesars closed down 0.3 percent to $12.71. Boyd shares closed up 0.3 percent to $26.71. Red Rock shares closed down 4.9 percent to $20.61. Sands shares closed down 0.2 percent to $58.31.

The Review-Journal is owned by the family of Las Vegas Sands Corp. Chairman and CEO Sheldon Adelson.

Contact Bailey Schulz at bschulz@reviewjournal.com or 702-383-0233. Follow @bailey_schulz on Twitter.