Shares of Wynn Resorts jumped 2% after hours Tuesday after the casino operator reported better-than-expected quarterly results, driven by the Las Vegas Super Bowl and recovery in China’s Macau region . We’re surprised the stock hasn’t risen further. Operating revenue rose 31% year over year to $1.86 billion, beating expectations of $1.79 billion, according to estimates compiled by LSEG. Adjusted earnings per share (EPS) came in at $1.59 per share, a significant deviation from the LSEG consensus estimate of $1.27. Adjusted real estate EBITDAR (earnings before interest, taxes, depreciation, amortization and restructuring or rent costs) – Wynn’s key profitability metric – increased 50% year over year to 647 million of dollars, above the consensus estimate of $603 million, according to FactSet. Wynn Resorts Why We Own It: We bought this casino operator for its well-run resorts in Las Vegas, Boston and especially the Macau region of China – where we expect more upside potential as the second global economy continues to recover from the crisis. pandemic lockdowns. The company generated more profits in 2023 than in 2019 and yet the stock is trading well below its pre-Covid levels. Competitors: Las Vegas Sands, MGM Resorts International, DraftKings Last Purchase: February 20, 2024 Initiation: April 2021 Conclusion The market has become concerned about anything related to discretionary spending after seeing lukewarm guidance from several consumer companies this season results. But Vegas numbers released Tuesday show that Wynn’s premier resorts — and the quality services they offer — have a degree of pricing power that’s underappreciated. As for Macau, which is expected to generate just over half of adjusted EBITDAR this year, concerns about the Chinese consumer continue to weigh heavily on the stock, preventing it from returning to the multiple it was trading at pre-Covid. And yet, Wynn continues to post results that show recovery almost all the way. Even though the Chinese are spending less on goods, Wynn’s hotel occupancy rate of 99% tells a much different story. This shows a willingness to travel domestically despite economic headwinds. And these revenues generate a higher margin today than they did five years ago. The stock fell into the $90s, down from $106 after the last quarterly report – even though we saw a series of beats in each property and heard an optimistic view of April. These are excellent results from Wynn. We reiterate our rating of 1 and our price target of $125. Quarterly Results Here is a more detailed look at how each operating region and segment performed in the fourth quarter, starting with Macau. Macau It was a double beat in Macau, with both properties (Wynn Palace and Wynn Macao) reporting revenue and profits above Street expectations. After looking at the recent Las Vegas Sands neighborhood, which has seen some weakness in the area due to planned renovations, we felt like Macau was in great shape. Those visitors had to stay elsewhere, leading Wynn to take market share, with a collective adjusted EBITDAR of $340 million on gross gaming revenue market share that the company said was higher than the previous quarter and at its 2019 prices. Incidentally, that $340 million in adjusted EBITDAR represents about 88% of what the company generated in 2019, a slight improvement over the 85% level Wynn generated in the fourth quarter 2023 compared to the same period in 2019. While a full 100% recovery remains elusive, Wynn’s disciplined operating expenses and a favorable mix shift toward higher-margin mass gaming customers are generating stronger margins. During the quarter, Macau’s EBITDA margin was approximately 34%, up 140 basis points from Q4 2023 and 310 basis points from Q1 2019. Guidance: Further good news , management highlighted the strength of the first quarter. continued until April. Its massive drop per day – the amount of money Wynn collected in its gaming table drop boxes – in April was up 30% compared to 2019 figures. On the non-gaming side, its rate of Hotel occupancy was 99%. The company also expressed satisfaction with the results of May’s Golden Week despite unfavorable weather conditions. The holiday period spanned May 1-5, and management said its massive decline per day was up 30% from the comparable period in 2019. Las Vegas Las Vegas posted a record first quarter of Adjusted real estate EBITDAR. February was the biggest month of the quarter, thanks to the Super Bowl being played for the first time in Vegas. A strong Chinese New Year also contributed to the results. Although the company’s casino revenue fell more than 12% from last year, the non-gaming portion was very strong, with hotel revenue up 21%. Guidance: Management said its key trends in April were healthy, with declines, management and revenue per available room (RevPAR) growing year-over-year despite tough comparisons. Encore Boston’s Harbor Wynn property in Boston was relatively stable, with revenue and adjusted EBITDAR stable despite poor weather in January and inflationary pressures. Guidance: As for the current quarter, management said demand “remained healthy” through April. However, the company is suspending development of the property due to the inability to reach an agreement with local authorities on financial terms. The company plans to redirect this capital towards other development projects it is working on, such as its project in the United Arab Emirates. (Jim Cramer’s Charitable Trust is long WYNN. See here for a complete list of stocks.) As a subscriber to CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after a trade alert is sent before buying or selling a stock in his charity’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after the trade alert is issued before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AS WELL AS OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY OBLIGATION EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
The Wynn Las Vegas Resort and Casino at dusk in Las Vegas, Nevada, United States on Monday, May 8, 2023. Wynn Resorts Ltd. is expected to release its results on May 10.
Bridgett Bennett | Bloomberg | Getty Images
Actions of Hotels in Wynn jumped 2% after hours Tuesday after the casino operator reported better-than-expected quarterly results, driven by the Las Vegas Super Bowl and recovery in China’s Macau region.
We’re surprised the stock hasn’t risen further.
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