Wynn Resorts Posts Solid Q1 Earnings, Revs - Analyst Blog

Las Vegas, NV-based casino operator Wynn Resorts Ltd. WYNN began 2014 on a strong note with impressive first quarter results wherein both earnings and revenue beat the Zacks Consensus Estimate.

Adjusted earnings of $2.32 in the first quarter grew 14.3% from the year-ago quarter. The figure also comfortably surpassed the Zacks Consensus Estimate of $2.11 by 9.9%.  The upside is attributable to solid top-line growth owing to strong gambling revenues from its Macau operations. Share price rose 1.3% in response.

Adjusted earnings exclude pre-opening cost, loss on extinguishment of debt, increase in swap fair value, property charges and other and adjustment for non-controlling interest.

Net revenue grew 9.8% year over year to nearly $1.51 billion and beat the Zacks Consensus Estimate of $1.48 billion by 2.3%. The upside was backed by the company's solid Macau business, partially offset by a decline in revenues from Las Vegas operations.

Adjusted earnings before interests, taxes, depreciation and amortization (EBITDA) increased 9.7% year over year to $494.6 million, driven by higher profits in Macau.

The company owns and operates casino hotel resorts in Las Vegas and in Macau Special Administrative Region of the People's Republic of China.

Macau Operations

Wynn reports its Macau table games results under two categories — the VIP segment and the mass market segment.

Wynn Macau's revenues were up 14.2% year over year to $1.13 billion in the quarter, benefiting from a solid VIP business as well as the mass market segment. Table games win in the mass market category was $300.7 million, up 23.7% year over year. Moreover, the mass market table games win rate was 43.4%, higher year over year as well as sequentially.

Table games turnover in the VIP segment went up 26.7% from the prior-year period to $36.0 billion due to an improvement in the market. Though VIP table games win rate (based on turnover) of 2.79% was below the year-ago level of 3.14%, it was within the expected range of 2.7% to 3.0%.

Revenue per available room (RevPAR) increased 11.8% to $331 in the first quarter, gaining from a 430 basis points (bps) improvement in occupancy rate and a 7.3% rise in average daily rate (ADR).

Gross non-casino revenues came in at $113.0 million, up 7.3% year over year. In the first quarter, Adjusted EBITDA margin went up 60 bps to 33.9%.

Wynn Resorts is engaged in developing a Wynn Palace Project on the Cotai land in Macau, which is slated to open in the first half of 2016. Currently, the company expects the project to cost around $4.0 billion. The company spent around $163.1 million on the Cotai project in the quarter.

Las Vegas Operations

According to Brooking Institution, Las Vegas was one of the areas hit hardest by the recession. Though the economy is recovering, challenges remain.

Wynn Resorts' revenues from Las Vegas operations declined 1.5% year over year to $380.9 million due to weak casino revenues. Net casino revenues declined 11.9% from the prior-year period to $155.3 million. Table games win percentage was 20.7%, lower than 26.7% in the prior-year quarter as well the expected range of 21.0% to 24.0%.

However, room revenues were up 12.6% to $103.1 million, thanks to improved average daily rate and occupancy rate. During the quarter, RevPAR was up 12.6%, benefiting from a 500 bps increase in occupancy rate and a 6.2% rise in ADR. In the first quarter, EBITDA margin declined 210 bps to 29.0%.

Our Take

Except for net casino revenues at Wynn Resorts' Las Vegas operations, the overall scenario was impressive. Though Las Vegas operations stumbled in the first quarter of 2014, revenues grew throughout 2013, thereby demonstrating that the situation is far from worse.

Macau continues to be the driving force for most casino operators. Gambling revenues in Macau operations grew 10.6% year over year for the month of April - suggesting that revenues could be strong in the second quarter as well.

Wynn Resorts presently has a Zacks Rank #2 (Buy). Some other casino operators worth considering at the current level include Melco Crown Entertainment Limited MPEL, MGM Resorts International MGM and Multimedia Games Holding Company, Inc. MGAM. All these stocks carry the same Zacks Rank as Wynn Resorts.