The year 2019 has been an eventful one for Wynn Resorts, Limited WYNN so far, after a disappointing end to 2018. The stock, which witnessed a sharp decline in 2018, has gained 21.4% year to date, outperforming the industry’s 18.3% rally. The uptick can be primarily attributed to solid Las Vegas operations performance. However, earnings miss for the third straight quarter remains a concern. Let’s delve deeper.
Wynn Resorts generates a solid share of its revenues from Macau resorts. Apart from the gaming business in Macau, the company has been increasingly focusing on boosting non-gaming revenues. Given the decent visitation pattern in Macau, infrastructure development and government’s efforts to boost tourism over there, non-gaming sources are expected to drive revenues moving ahead.
Meanwhile, in order to boost performance in Las Vegas, the company has remodeled rooms at its properties and the baccarat pit. Although tourism in Las Vegas has not yet reached the pre-recession level, it is on its way to recovery. Notably, the number of visits has been increasing every year. With the improving job scenario and stabilizing gas prices, the consumer spending environment in the domestic markets is improving. Backed by the optimism surrounding tourism in Las Vegas and increasing visitation pattern, revenues are likely to grow. Moreover, the company’s casino resort, expected to open in Massachusetts in 2019, will strengthen its presence in the U.S. market.
In the fourth quarter, revenues from Las Vegas operations rose 3.1% year over year to $393.6 million. The upside can be attributed to decline in casino and non-casino revenues. Also, casino revenues improved 3.5% to $104.8 million. Total non-casino revenues grew 2.9% year over year to $288.8 million. Room revenues were up 10.8% to $117.9 million. Also, RevPAR surged 13% to $279. Occupancy rate was 88.6% compared with 82.1% in the year-ago quarter.
Wynn Resorts’ earnings missed the Zacks Consensus Estimate for the third straight quarter, when the company posted fourth-quarter 2018 results. Adjusted earnings of $1.06 per share lagged the consensus mark of $1.36 and decreased 24.3% on a year-over-year basis. This downside can be attributed to decline in operating income from Las Vegas operations and Wynn Macau, which overshadowed growth in Wynn Palace operations.
Furthermore, Wynn Resorts’ heavy reliance on debt financing remains a concern. At the end of fourth-quarter 2018, total outstanding debt amounted to $9.42 billion, including $3.10 billion of Wynn Las Vegas related debt, $4.23 billion of Macau debt and $984 million at the parent company and other.
Zacks Rank & Stocks to Consider
Wynn Resorts has a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include Melco Resorts & Entertainment Limited MLCO, PlayAGS, Inc. AGS and Zynga Inc. ZNGA, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Melco Resorts & Entertainment, PlayAGS, and Zynga have an impressive long-term earnings growth rate of 18.7%, 12%, and 22.5%, respectively.
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