Why Is Wynn (WYNN) Down 0.7% Since Last Earnings Report?

A month has gone by since the last earnings report for Wynn Resorts (WYNN). Shares have lost about 0.7% in that time frame, underperforming the S&P 500.

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

Wynn Resorts Q2 Earnings & Revenues Miss Estimates

Wynn Resorts reported second-quarter 2018 financial numbers, wherein both earnings and revenues missed the Zacks Consensus Estimate. Dismal performance by the company’s Macau operations led to the lower-than-expected results in the quarter under review.

Adjusted earnings of $1.53 per share missed the consensus mark of $2.03 by 24.6%. However, the bottom line increased 21.4% on a year-over-year basis. This improvement can be attributed to substantial rise in operating income from Wynn Palace.

On a GAAP basis, Wynn Resorts reported earnings per share of $1.44 compared with 73 cents in the year-ago quarter.

Revenues totaled $1,605.4 million, which lagged the consensus estimate of $1,694 million by 5.5%. The top line also improved 9%, given significant contribution from Wynn Palace, and Las Vegas operations.

Concurrent with the earnings announcement, the company declared quarterly cash dividend of 75 cents per share. The dividend will be payable Aug 28, 2018 to shareholders of record as of Aug 16.

Wynn Macau Operations Disappoints

Wynn Macau revenues were down 14.9% year over year to $543.3 million in the quarter due to lower casino revenues.

Notably, casino revenues in the reported quarter decreased 18.1% to $473.3 million. Table games turnover in the VIP segment dropped 13.1% to $13.93 billion. Moreover, the VIP table games win rate (based on turnover) was 2.56%, down 97 basis points (bps) year over year and below the projected range of 2.7-3%.

Table drop in the mass market segment was $1.29 billion, up 21.1% year over year. Also, table games win in the mass market category amounted to $252 million, up 13.8%. Table games win percentage in mass market operations rose 19.5%, up 130 bps from the year-ago quarter.

Non-casino revenues improved 15.9% to $70 million. Room revenues were up 16% year over year at $27.1 million. Revenue per available room (RevPAR) also increased 18.3% in the second quarter to $271 million. While average daily rate (ADR) rose 15.7%, occupancy rate increased 190 bps to 99.4%.

Wynn Palace Continues to Impress

Revenues from Wynn Palace totaled $620.6 million in the quarter, up a massive 56.6% year over year. Casino revenues summed $525 million, up 62.4% year-over-year. Furthermore, table games turnover in the VIP segment was $14.03 billion, up 20.9% year-over-year. VIP table games win rate (based on turnover) was 3% within the expected range of 2.7-3% and up 82 bps year over year. Table drop in the mass market segment was $1.22 billion, surging 67.2% from the year-ago quarter. While table games win in mass market operations amounted to $280.6 million, up 66.3% year-over-year. However, mass market win rate declined 10 bps to 23%.

Non-casino revenues were $95.6 million, up 30.6% from the year-ago quarter. Also, room revenues totaled $40.7 million, up 46.2% from the year-ago figure. Notably, ADR came in at $254 million (up 36.6%), occupancy was 96.2% (flat year over-year) and RevPAR was $245 million (surged 37.6%).

Las Vegas Operations Gains for Second Straight Quarter

Revenues from Las Vegas operations inched up 0.8% year over year to $441.6 million in the quarter under review. The upside can be attributed to rise in both casino and non-casino revenues.

Casino revenues rose 1.2% to $101.7 million. While table games drop increased 3.7% to $403.7 million, table games win came in at $101 million flat year over year. Table games win percentage of 25% increased 80 bps from the year-ago quarter and was within the expected range of 22-26%.

Total non-casino revenues also inched up 0.7% year over year to $339.8 million. Room revenues were up 4% to $118.3 million. During the quarter, RevPAR grew 3.4% to $274 million on the back of a 5% increase in ADR. Occupancy rate was 87.7% compared with 88.7% in the year-ago quarter.

While food and beverage revenues increased 2.3% to $170.9 million, entertainment, retail and other revenues were down 10.7% to $50.7 million.

Solid Operating Performance at Wynn Palace

Adjusted property earnings before interests, taxes, depreciation and amortization (EBITDA) increased 10.8% year over year to $476.4 million driven by improvement at Wynn Palace, partially overshadowed by decrease at Wynn Macau and Las Vegas operations.

In the quarter, adjusted property EBITDA from Wynn Macau summed $172.9 million, down 17.8% year over year. The same from Wynn Palace surged 105.1% to $179.3 million. Adjusted property EBITDA from Las Vegas operations was down 6.1% to $124.2 million.

Cash Position

As of Jun 30, 2018, Wynn Resorts’ cash and cash equivalents, restricted cash and investment securities totaled $1.58 billion.

Outstanding debt at the end of the second quarter amounted to $8.31 billion, including $3.10 billion of Wynn Las Vegas related debt, $4.23 billion of Macau debt and $985.9 million at the parent company and other.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -11% due to these changes.

VGM Scores

Currently, Wynn has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Zacks style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Wynn has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

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