Wynn Resorts Limited (WYNN), a leading developer, owner and operator of destination casino resorts, posted better-than-expected first quarter 2011 results on April 19, 2011, buoyed by booming Macau operations and improved performance at Las Vegas.
The recent earnings announcement, subsequent analyst estimate revisions and the Zacks ratings for both the short-term and the long-term are covered in depth below.
Earnings Report Review
During the quarter, Wynn Resorts reported earnings of $1.38 cents per share, surpassing the Zacks Consensus Estimate of 73 cents and last year's 27 cents.
The results were boosted by higher-than-expected revenues. Net revenues advanced 38.7% year over year to $1,260.3 million, outpacing the Zacks Consensus Estimate of $1,133.0 million.
Revenue at Wynn Macau jumped 46.6% year over year and at Las Vegas operations, was up 24.0%.
During the quarter, company also doubled its dividend to 50 cents per share.
(Read our full coverage on this earnings report: Wynn Beats, Doubles Dividend)
Earnings Estimate Revisions: Overview
Following the first quarter earnings release, the Zacks Consensus Estimate for the company has been on the rise, with analysts remaining bullish on the stock. The strong Macau results, recovery at Las Vegas business and double dividend to shareholders have bolstered their confidence. The earnings estimate details are discussed below.
Agreement of Estimate Revisions
Revision trends in the last 30 days drifted towards the positive side. For fiscal 2011, 20 out of 24 analysts covering the stock raised their estimates and none of the analysts reduced their estimates. For fiscal 2012, 18 out of 23 analysts increased their estimates and 1 slashed his/her estimates.
In the last 7 days, 18 analysts lifted their estimates for 2011 and 17 analysts upped their estimates for 2012. However, none of the analysts trimmed their estimates for 2011 and 2012.
A clear positive bias can be witnessed among the analysts, who mostly remain bullish on Wynn Macau. The analysts have increased their estimates based on continued strong results in Macau, improved property-level EBITDA margins in Macau and stronger contributions from Encore Macau.
Moreover, Las Vegas business is certainly poised to grow in the coming years as revenues jumped 24.0% year over year during the quarter and convention bookings continue to show signs of improvement heading into 2011. The analysts are also encouraged by the company’s decision to double its dividend.
Magnitude of Estimate Revisions
The magnitude of estimate revisions for Wynn Resorts has been quite significant over the last 30 days. Following the release of first quarter results, estimates for fiscal 2011 and fiscal 2012 have surged by 94 cents and 86 cents to $4.08 and $4.96, respectively. In the last 7 days, estimates for 2011 and 2012 jumped by 83 cents and 70 cents respectively.
Our Recommendation
We remain positive on Wynn Resorts as the company has strong brand equity and is strategically positioned to command a premium rate relative to the overall gaming and lodging industry. Wynn Macau’s contribution to the company’s earnings has increased significantly in the last two years. The resort currently generates over 69% of the total revenue.
Macau, the only Chinese city where gambling is legal, has survived the economic downturn relatively well. In order to expand its operations in Macau, Wynn Resorts has opened Encore at Wynn Macau and the Cotai project is in the pipeline. We expect the expansion to significantly add to the company’s top-line going forward.
Additionally, with the global economy showing a gradual recovery, the company is experiencing an increase in demand. We also remain encouraged by the company’s strong brand equity, healthy balance sheet, relatively low capital requirements and ability to execute in a difficult operating environment.
Additionally, its Las Vegas business, which faced the worst during the slowdown, is also rebounding but recovery remains slow due to excess capacity in the market. Moreover, we remain cautious on the stock based on limited diversity, absence of major development except the Cotai project and stiff competition from companies such as Las Vegas Sands Corp (LVS) and MGM Resorts International (MGM).
Accordingly, the company holds a Zacks #1 Rank, which translates into a short-term Strong Buy rating. Our long-term recommendation for the stock remains Outperform.
About Earnings Estimate Scorcard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/.
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