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On Nov 22, we upgraded our recommendation on Las Vegas Sands Corp. (LVS - Analyst Report) from Neutral to Outperform on the back of better-than-expected performance in the third quarter of 2013, which was reported on Oct 10.

Why the Upgrade?

The casino operator has been consistently posting strong earnings results for the past three quarters, driven by solid top-line growth.

In its recently concluded third-quarter 2013 results, Las Vegas Sands beat the Zacks Consensus Estimate for both revenues and earnings. Quarterly earnings of this Zacks Rank #2 (Buy) company also grew 78.3% year over year. Results in the quarter benefited from decent top-line growth and margin expansion. Total revenue also increased 31.7% year over year, led by the company’s solid Macau business and growing Singapore as well as Las Vegas businesses.

After the release of the third-quarter results, the Zacks Consensus Estimate for 2013 has gone up 3.5% to 83 cents per share and that for 2014 improved 7.2% to $3.56 during the past 60 days. 

Reasons for the Positive Bias

Along with the strong third-quarter results, the company’s growth story looks attractive. Operating since 1988, Las Vegas Sands is considered as the leader in the gaming and lodging industry.

Las Vegas Sands generates over 80% of its revenues from its properties in Macao, the biggest and highly profitable gaming destination in the world. The visitation pattern in Macao is continuously growing. We believe that the company’s Macao properties would highly benefit from increasing demand pattern and the flourishing mass market segment. Along with these, the company’s upcoming properties like Sands Cotai Central and The Parisian Macao in Cotai Strip will help the company to increase its market share in the region and augment business.

The company’s Las Vegas business is also improving, driven by higher leisure demand and gradual recovery of the U.S. economy. Moreover, the stabilizing Singapore business is another positive for the stock.

Additionally, nearly 43% dividend hike announced with the third-quarter results is encouraging which reflects that Las Vegas Sands is heading toward strong growth.

Other Stocks to Consider

The company carries a Zacks Rank #2 (Buy). Investors interested in the gaming industry may consider stocks like Melco Crown Entertainment Limited (MPEL - Snapshot Report), Bally Technologies, Inc. (BYI - Snapshot Report) and Century Casinos Inc. (CNTY - Snapshot Report). While Melco Crown has a Zacks Rank #1 (Strong Buy), Bally Technologies and Century Casinos hold a Zacks Rank #2.

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