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Las Vegas Operations to Hurt Wynn Resorts (WYNN) Q4 Earnings

Zacks Equity Research

Wynn Resorts, Limited WYNN is scheduled to report fourth-quarter 2018 earnings on Jan 30, after the closing bell.

We expect increased contributions from non-gaming revenues, coupled with expansion in the domestic market, to have driven growth in the to-be-reported quarter. However, revenue growth in the quarter may have been negatively impacted by a slowdown in the company’s Las Vegas operations. Further, margin contraction in the domestic operations is likely to have affected earnings in the fourth quarter.

Nevertheless, the company has been deriving a solid share of revenues from Macau resorts. Gambling revenues from Macau surged 16.6% in December and surpassed the Zacks Consensus Estimate, which is likely to benefit the company in the quarter under review.

Subsequently, shares of Wynn Resorts have displayed some resilience of late. After losing 44.2% in the past year,  the stock has increased 12.7% in the past three months, outperforming the industry’s growth of 11.1%.


Let us find out how the company’s fourth-quarter results will turn out.

Top-Line Picture

Apart from the gaming business in Macau, Wynn Resorts has been increasingly focusing on boosting non-gaming revenues. Given the decent visitation pattern in Macau, infrastructure development and the government’s efforts to bolster tourism, non-gaming sources are expected to boost revenues, going forward. Meanwhile, Wynn Resorts has been offering various promotional allowances and undertaking initiatives to attract gambling patrons.

However, while Macau revenues are likely to have taken an impressive turn in the fourth quarter, we believe that domestic revenues will negatively impact the overall top line. The Zacks Consensus Estimate for Wynn Resorts’ revenues in the fourth quarter is pegged at $1.6 billion, suggesting an 8.1% fall from the year-ago quarter’s revenues.

Additionally, the consensus estimate pegs fourth-quarter revenues for Las Vegas operations at $384 million, which marks a 3.8% decline from the third quarter of 2018.

Earnings to Disappoint

While Wynn Resorts’ earnings before interests, taxes, depreciation and amortization (EBITDA) at Wynn Palace has been rising, given its operational excellence, the same has been falling at Las Vegas, which, in turn, may have affected fourth-quarter earnings.

Subsequently, the Zacks Consensus Estimate for fourth-quarter earnings is pegged at $1.27, suggesting a 9.3% year-over-year decline.

What Our Model Predicts

Our proven model suggests a beat for Wynn Resorts in the quarter to be reported. That is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for that to happen. Fortunately, that is the case here as you will see below.

Earnings ESP: The Earnings ESP for the company is +9.00% as the Most Accurate Estimate is pegged at $1.39 while the Zacks Consensus Estimate is at $1.27. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Wynn Resorts currently carries a Zacks Rank #2.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions

Wynn Resorts, Limited Price and EPS Surprise

 

Wynn Resorts, Limited Price and EPS Surprise | Wynn Resorts, Limited Quote

Other Stocks to Consider

Here are some companies in the Consumer Discretionary sector, which, according to our model, also have the right combination of elements to come up with an earnings beat this quarter:

Deckers Outdoor DECK has an Earnings ESP of +3.63% and it currently sports a Zacks Rank #1. The company is scheduled to report quarterly numbers on Feb 7. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cinemark CNK has an Earnings ESP of +10.66% and a Zacks Rank #2. The company is anticipated to report quarterly results on Feb 22.

SeaWorld SEAS has an Earnings ESP of +38.46% and a Zacks Rank #1. The company is expected to report quarterly numbers on Feb 26.

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