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Why Is Red Rock Resorts, Inc. (RRR) Down 4% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Red Rock Resorts, Inc. (RRR). Shares have lost about 4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Red Rock Resorts, Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Red Rock Resorts Q4 Earnings & Revenues Beat Estimates

Red Rock Resorts reported better-than-expected results in fourth-quarter 2018, after reporting mixed numbers in the prior-year quarter. Notably, this marked the fourth straight quarter of revenue beat. Results were driven by robust Las Vegas operations performance.

Adjusted earnings came in at 30 cents per share beating the Zacks Consensus Estimate by a penny. However, the metric declined 9.1% on a year-over-year basis. Revenues totaled $431.5 million, faring better than the Zacks Consensus Estimate of $406 million. The top line also increased 7.8% year over year. The uptick can primarily be attributed to year-over-year gain in Las Vegas operations, which overshadowed decline in Native American management fees.

Casino revenues in the quarter amounted to $240.8 million, up 8.6% on a year-over-year basis. While food and beverage revenues increased 14.7% to $101 million, Other revenues rose 17.9% to $27.1 million. Room also surged 6.4% to $42.2 million. However, management fees revenues declined 26.6% to $20.5 million.

Segmental Details

Las Vegas Operations

Revenues at this segment summed $409.5 million, up 10.4% year over year. Also, the segment’s EBITDA increased to $121 million, up 14.4% year over year. On a same-store basis, the segment registered highest growth for both revenues and EBITDA since 2007. Results were driven by robust performance across both gaming and non-gaming segments.

Native American Management

Revenues at this segment declined 26.9% to $20.4 million. Meanwhile, adjusted EBITDA decreased to $19.1 million from $24.5 million on termination of the Gun Lake management agreement in February 2018.

Other Financial Details

As of Dec 31, 2018, Red Rock Resorts had cash and cash equivalent of $114.6 million. Outstanding debt at the end of the quarter was $2.91 billion. The company declared quarterly cash dividend of 10 cents, payable Mar 29, 2019, to its shareholder of record as of Mar 14, 2019.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Red Rock Resorts, Inc. has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Red Rock Resorts, Inc. has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.



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