Should You Place Your Bets On Steve Wynn?

Wynn Resorts

reported strong earnings last night after the bell and CEO Steve Wynn provided analysts and conference call listeners to one of the more entertaining rants about politics in America. Despite the blowout quarter, shares are falling around 2% today, as it appears traders are taking some profits after the earnings report. The Las Vegas-based casino operator reported earnings of $1.60 per share on $1.37 billion in revenues, far exceeding Wall Street estimates of 90 cents per share on $1.26 billion in revenues. Helping results was a 36.7% revenue improvement in Macau, not to mention an improvement in the Las Vegas gaming market, something that surprised everyone on Wall Street. "They had stupendous results in both Macau and Vegas," said Janet Brashear, an analyst with Sanford C. Bernstein & Co. "Vegas is the biggest surprise," she said, with earnings "a lot more solid for the balance of the year than we might have expected." Macau is one of the major reasons, if not the major reason to own Wynn Resorts, as it is the only place in China were gambling is legal. Gambling revenue in Macau surged 52% in June from last year ago, according to the Chinese government. Wynn owns two casinos there and is working on a third one, pending government approval. The property, which will be built on the Cotai Strip will have 500 table games, 1,500 rooms, restaurants, stores, and a theater, according to CEO Wynn. "We're moving right along nicely and on schedule," said Wynn. "This project is going to justify the time it took to create it. It's a humdinger." Breaking down the quarter, Wynn said that revenue rose 32.4% from last year, aided by a 22.8% rise in Las Vegas revenues. Macau revenues rose 36.7% from last year. According to CFO Matt Maddox, margins were rising across the board, including in gambling revenue, VIP services, and other non-gaming segments. While shares are not cheap at 31 times forward earnings, clearly investors like what they see from Wynn, whatever his political viewpoints may be. Wynn was very outspoken on the call yesterday, saying that the Obama administration and its economic policies were a "wet blanket" on the business community. "I'm saying it bluntly, that this administration is the greatest wet blanket to business, and progress and job creation in my lifetime," Wynn said when asked about Las Vegas real estate. "The guy [Obama] keeps making speeches about redistribution, and maybe we ought to do something to businesses that don't invest or hold too much money," Wynn said. "We haven't heard that kind of talk except from pure socialists." Wynn has always been a very shareholder friendly company, paying special dividends, and the company may continue that practice this year, as Wynn said the company is always looking for ways to give money back to shareholders. It looks as if the Las Vegas market is starting to come back, based on these results, which would prove extraordinarily well for Wynn Resorts and its shareholders, as Las Vegas has been a dead-weight for sometime. The real estate market is starting to improve, albeit slowly. If the Las Vegas market can return to even half of its former glory, and with Macau booming, investors may want to pull the lever on Wynn Resorts. Place your bets.

Traders who believe that Wynn is likely to continue reporting strong results might want to consider the following trades:

Traders who believe that Wynn is petering out here may consider alternate positions: