Following Red Rock's Q2 Results, Citi's Buy Rating Unchanged

Citi maintained its Buy rating on Red Rock Resorts Inc RRR despite the company's Q2 EPS missing estimates. However, the results came in line with Citi estimates.

The brokerage's bullish stance is based on the thesis that Red Rock is a major beneficiary of a continuing recovery in the Las Vegas regional gaming market where it had an estimated 43 percent share in 2015. For the second quarter, Las Vegas operations' EBITDA rose 3 percent to $105 million, in line with Citi estimates of $106 million.

"We maintain our view that the Las Vegas regional gaming market is poised to benefit from the local residents' increasing wealth, aided by a better employment environment and the recovery of the property market," analyst Anil Daswani wrote in a note.

Native American business reported an in-line EBITDA of $20 million. The expansion of Graton Resort and Gun Lake Casino is scheduled to be completed by mid-November and 2Q17 respectively.

"When current expansions are completed, we expect EBITDA from the two contracts to grow 10% in 2017E and 11% in 2018E," Daswani continued.

Noting that the recent refinancing of the debt would reduce interest costs, the analyst raised his FY16-18 EPS estimates by 4-8 percent. The current estimates are $0.86, $0.65 and $0.73 for 2016-18.

Daswani maintained his $25 price target on the stock, which is up 4.61 percent to $22.92.