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Wynn Resorts Beats on Q3 Earnings, Rev

Zacks Equity Research

Casino operator Wynn Resorts Ltd.’s (WYNN) third-quarter 2013 adjusted earnings of $1.84 per share beat the Zacks Consensus Estimate of $1.64 by 12.2% and the prior-year quarter’s earnings of $1.48 per share by 24.3%. Earnings in the quarter benefited from both top-line and profit growth.

Net revenue grew 7.1% year over year to nearly $1.39 billion, backed by the company’s solid Macau business. Quarterly revenues were also higher than the Zacks Consensus Estimate of $1.36 billion by 2.2%.

Adjusted earnings before interests, taxes, depreciation and amortization (:EBITDA) increased 8.2% year over year to $435.6 million, driven by 12.6% rise in the adjusted EBITDA in Macau operations.  

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 9.6% year over year to $997.6 million in the quarter, benefiting from the strong mass market segment and growing VIP business. Table games win in the mass market category was $239.8 million, up 13.5% year over year. Moreover, the mass market table games win rate was 38.0%, higher than the year-earlier rate of 30.8%.

The table games turnover in the VIP segment went up 9.8% from the prior-year period to $30.3 billion due to the improving VIP market. Though VIP table games win rate (based on turnover) of 3.04% was below the year-ago level of 3.08%, it was higher than the expected range of 2.7% to 3.0%.

Revenue per available room (RevPAR) was up 2.7% to $297 in the third quarter, gaining from 160 basis points (bps) improvement in the occupancy rate and 1% rise in average daily rate (:ADR). Gross non-casino revenues came in at $97.8 million, up 0.6% year over year.

Wynn Resorts is engaged in developing a full-scale integrated resort on the Cotai land in Macau, which is slated for a 2016 opening. Currently, the company expects the project to cost around $4.0 billion. The company spent around $109.9 million on the Cotai project in the quarter.

Las Vegas Operations

Wynn Resorts’ revenues from the Las Vegas operations increased 1.1% year over year to $392.5 million as net casino revenues increased 3.9% from the prior-year period to $161.6 million. Moreover, gross non-casino revenues surged 0.9% annually to $282.7 million, driven by higher revenue gains from the hotel, food and beverage as well as retail segments, somewhat offset by lower entertainment sales.

During the quarter, RevPAR was up 5.0% benefiting from 220 bps increase in occupancy rate and 2.4% rise in ADR. In the third quarter, EBITDA margin declined 130 bps to 27.1% due to lower operating income.

Our Take

Wynn Resorts’ solid second-quarter results suggest that it has begun to gain from the recovery of the mass market category in Macau. Strong RevPAR growth in both Macau and Las Vegas markets in the third quarter deserves a special mention.

Moreover, a special dividend announced in the reported quarter further encouraged investors.

Las Vegas, Nevada-based Wynn Resorts holds a Zacks Rank #2 (Buy). Some other casino operators that are worth considering at the current level include Melco Crown Entertainment Limited (MPEL), Las Vegas Sands Corp. (LVS) and Full House Resorts Inc. (FLL). While Melco Crown carries a Zacks Rank #1 (Strong Buy), Full House Resorts and Las Vegas Sands carry a Zacks Rank #2.

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