Shares of Wynn Resorts Ltd. (NASDAQ:WYNN) declined over 6% in afterhours trading on Nov 2, after the company reported lower-than-expected third-quarter 2016 results. Both earnings and revenues lagged the Zacks Consensus Estimate.
Earnings and Revenue Discussion
Adjusted earnings of 75 cents per share missed the Zacks Consensus Estimate of 79 cents by 5.1%. Further, earnings decreased 12.8% from the year-ago figure of 86 cents mainly due to lower operating income margin.
Adjusted earnings exclude pre-opening cost, a change in interest rate swap fair value, increase in redemption note fair value, property charges as well as income tax and non-controlling interest impact.
Wynn Resorts’ revenues of $1.11 billion failed to surpass the Zacks Consensus Estimate of $1.13 billion by 1.8%. However, revenues increased 11.4% on the back of an improved performance by Las Vegas Operations and the Wynn Palace opening, partly offset by lower revenues from Wynn Macau.
Adjusted property earnings, before interests, taxes, depreciation and amortization (EBITDA), rose 9.1% year over year to $305.4 million on the back of higher revenues from Wynn Palace. Meanwhile, total operating costs and expenses increased 22.4% to $1.03 billion primarily owing to higher pre-opening costs along with a rise in casino, rooms, food and beverage, property charges and general and administrative expenses.
Macau Operations
Wynn Resorts reports its Macau table games results under two segments – VIP and mass market.
Wynn Macau revenues decreased 311.5% year over year to $518.1 million in the quarter, owing to lower casino revenues. Notably, casino revenues from Macau operations declined 10.9% to $488.3 million.
Notably, the Macau region has been struggling over the past few quarters due to the Chinese government’s anti-graft corruption drive, which has lowered footfall at the casinos. Though, gross gaming revenues in Macau declined in July, it marked a revival and rose in August and September. However, it was not enough to turn around the company’s operations in the region, this quarter. Also, cannibalization at Wynn Macau given the opening of Wynn Palace hampered the results.
Meanwhile, table games turnover in the VIP segment plunged 10.5% to $10.9 billion due to a sluggish Macau VIP market. The VIP table games win rate (based on turnover) was 3.34%, up 17 basis points (bps) and above the projected range of 2.7% to 3%.
Table drop in the mass market segment was $1.1 billion, down 7.6%. Table games win in the mass market category amounted to $205.2 million, down 12.6%. Moreover, mass market win rate was 18.6%, down 100 bps.
Non-casino revenues before promotional allowances tanked 17.4% to $63.7 million. Meanwhile, room revenues decreased 14.6% to $26.2 million. Revenue per available room (RevPAR) plunged 15.5% in the quarter to $257 million due to a 80-bps decline in occupancy rate and a 14.8% decline in average daily rate (ADR). In the quarter, adjusted property EBITDA was $151 million, down 7.3% due to weakness in the gaming segment.
Wynn Palace
On Aug 22, 2016, Wynn Resorts’ Chairman of the Board and Chief Executive Officer, Steve Wynn, unveiled the Wynn Palace resort in the Cotai area of Macau.
Wynn Palace featuring over 1,700 hotel rooms, suites and villas, a lake with gondolas and fountains, floral sculptures, expensive artwork, lounge and meeting space, a casino, stores, recreation and leisure facilities along with exclusive food-and-beverage outlets cost over $4 billion. it is the first resort of the company in Cotai region.
Wynn Resorts’ revenues from Wynn Palace were $164.6 million in the quarter, while casino revenues totaled to $146.7 million.
Meanwhile, table games turnover in the VIP segment was nearly $4.2 billion and VIP table games win rate (based on turnover) was 2.90%, within the projected range of 2.7% to 3%.
Table drop in the mass market segment was $275.9 million and table games win amounted to $51.5 million. Meanwhile, mass market win rate was 18.7%.
Total non-casino revenues, before promotional allowances were $33.9 million. During the quarter, room revenues were $14.2 million with an ADR of $287 million, occupancy of 70.8% and REVPAR of $203 million. In the quarter, adjusted property EBITDA stood at $25.5 million.
Las Vegas Operations
Wynn Resorts’ revenues from Las Vegas operations were up 3.9% to $427.1 million due to higher casino and non-casino revenues. Notably, casino revenues from Las Vegas operations inched up 0.7% to $153.2 million. Meanwhile, table games win percentage was 24.7%, up 100 bps, and within management’s guidance range of 21–25%.
Total non-casino revenues, before promotional allowances, increased 4.2% year over year to $316.3 million. Room revenues were up 9.1% to $112.2 million. During the quarter, RevPAR grew 6.6% to $259 million on the back of a 4.7% rise in ADR and a 170 bps increase in occupancy rate. In the quarter, adjusted property EBITDA was up 10.1% to $128.9 million.
WYNN RESRTS LTD Price, Consensus and EPS Surprise
WYNN RESRTS LTD Price, Consensus and EPS Surprise | WYNN RESRTS LTD Quote
Zacks Rank & Stocks to Consider
Wynn Resorts presently has a Zacks Rank #3 (Hold). Better-ranked stocks in the sector include Monarch Casino & Resort Inc. (NASDAQ:MCRI) , Vail Resorts Inc. (NYSE:MTN) and Pool Corp. (NASDAQ:POOL) . While Monarch Casino & Resort and Vail Resorts sport a Zacks Rank #1 (Strong Buy), Pool carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Monarch Casino & Resort full-year 2016 earnings climbed 7.9% over the last 60 days. Further, for 2016, EPS is expected to grow 14.3%.
Vail Resorts’ posted positive earnings surprises in three of the last four quarters, with an average beat of 2.22%. The Zacks Consensus Estimate for Vail Resorts’ fiscal 2017 earnings moved up 6.5% over the last 60 days.
Pool’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 189.93%. Further, for 2016, EPS is expected to grow 18.9%.
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