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Wynn Resorts (WYNN) Misses on Both Top and Bottom Lines on Weak Vegas and Macau Numbers

By: , dated July 19th, 2012

Shares of casino giant Wynn Resorts (WYNN: Charts, News) firmed up this week after the company reported adjusted earnings of $1.38 per share, or $139 million, on revenue of $1.25 billion. Wynn’s bottom line increased from the 97 cents per share, or $122 million, in the prior year quarter, but its top line decreased from $1.37 billion. Both its top and bottom lines missed analysts’ estimates, which forecast earnings of $1.51 per share on revenue of $1.34 billion, but the miss wasn’t as wide as some investors had feared.

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Wynn earns 72% of its revenue from Asia, and 28% from the United States. The company is most comparable to its rival Las Vegas Sands (LVS: Charts, News), which earns 82% of its revenue from Asia and 18% from the United States. Both Wynn and Las Vegas Sands have been hit hard by worries regarding the Chinese slowdown and a corruption investigation in Macau. Shares of Wynn and Las Vegas Sands are respectively down 11% and 5% since the beginning of the year.

CEO Stephen Wynn attributed his company’s weak Las Vegas revenues to a “short term” decline in baccarat revenue. Wynn also noted the baccarat revenues tend to be more volatile than other table games. “The rest of the business was flat or slightly up in Las Vegas,” he commented. In Las Vegas, revenue fell 11.6% to $345.6 million, while EBITDA slid to $81.9 million. Casino revenue at its two flagship properties – the Wynn Las Vegas and Encore – dropped 37.7% to $98.6 million.

Wynn also reassured investors regarding China’s future, stating that the Chinese economy was “more stable than anywhere else.” Wynn’s Macau revenue slid 7.1% to $907.6 million, and EBITDA slid 3.9% to $302.2 million. This has been the first decline in its Macau revenue over the past three years. “Asia is starting to feel similar economic stresses to what Europe and the U.S. is feeling,” Wynn added. “I’m hoping we can be agile enough to adjust to those changes.”

In the Cotai region, Macau’s newest casino development area, Wynn has broken ground on its $4 billion second Macau resort. The resort features 2,000 hotel rooms, 600 gaming tables, 10 restaurants, a nightclub, shopping mall, and a spa. Wynn has called Cotai an “ambitious and far-reaching project” aimed at changing the luxury resort business in Macau, in the same manner Bellagio and Wynn redefined Las Vegas as a luxury destination. To complete the project, Wynn has requested a $2.3 billion loan, with an interest rate of less than 2%, which is expected to close within several weeks. The company has spent approximately $140 million on the Cotai project so far. The Cotai area, connected by shuttles from the Macau harbor, is also home of Las Vegas Sands’ flagship Venetian and new $4.4 billion Sands Cotai Central, which opened in April.

Stephen Wynn has also been entangled in a legal battle with co-founder Kazuo Okada, who was removed from the company’s board in February after allegations of the bribery of foreign officials in Asia surfaced. The internal wrangling, Chinese slowdown, and numerous probes regarding the conduct of American casino operators in Asia have all taken a toll on Wynn stock.

However, the stock is trading near its 52-week low of $94.52, far off its year-high of $172.58. The stock trades at 15 times forward earnings with a 5-year PEG ratio of 1.27, and pays a quarterly dividend of 50 cents per share – a 2% yield at current prices.

Other News About WYNN
Wynn Resorts Q2 Earnings Miss the Mark
Wynn misses on both the top and bottom lines.
Wynn Resorts Profit Up, But Misses Estimate
Wynn’s earnings per share grows, but its revenue weakens.

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Leo Sun Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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