Earnings Scorecard: Wynn Resorts – Analyst Blog

Wynn Resorts Limited (WYNN), a leading developer, owner and operator of destination casino resorts, posted better-than-expected second quarter 2010 results on July 29, 2010, buoyed by a solid performance from its Macau operations. 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.

 

 

During the quarter, Wynn Resorts reported earnings of 52 cents per share, surpassing the Zacks Consensus Estimate of 40 cents and last year’s 9 cents.

 

The results were boosted by higher-than-expected revenues. Net revenues advanced 42.8% year over year to $1,032.6 million, outpacing the Zacks Consensus Estimate of $986.0 million.

 

(Read our full coverage on this earnings report: Wynn Beats on Massive Macau Growth)

 

Earnings Estimate Revisions: Overview 

 

Following the second 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 bolstered the analysts’ confidence. The earnings estimate details are discussed below. 

 

 

From the table below, a positive inclination can be witnessed among the analysts, who mostly remain bullish on Wynn Macau. Revision trends in the last 30 days drifted toward the positive side. For fiscal 2010, nine out of 16 analysts covering the stock raised their estimates and 2 reduced their estimates. For fiscal 2011, eleven out of 20 analysts increased their estimates and 3 decreased their estimates. 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. Additionally, revenues in Las Vegas were slightly better.

 

However, a few analysts have trimmed their estimates as they remain cautious on Las Vegas performance. Plus, the company has no additional source of revenues until 2014, when management plans to open Wynn’s Cotai.

 

 

 

 Magnitude of Estimate Revisions

 

The table below indicates that earnings estimates rose 31 cents to $1.58 for fiscal 2010 and 43 cents to $2.24 for fiscal 2011, over the last 30 days. In the last 7 days, the Zacks Consensus Estimate for fiscal 2010 and 2011 remained unchanged.

 

 
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 65% 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 recently opened Encore at Wynn Macau and has a potential Cotai project 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. Its Las Vegas business, which was the worst hit at the time of slowdown, is also rebounding. We remain encouraged with the company’s strong brand equity, healthy balance sheet, relatively low capital requirements and ability to execute in a difficult operating environment.

 

Accordingly, we maintain a Zacks #2 Rank, which translates into a short-term Buy recommendation. Our long-term recommendation for the stock remains Outperform.

 

Apart from Wynn Resorts, another stock that promises growth opportunity is Las Vegas Sands Corp. (LVS), which currently has a Zacks #1 Rank, translating into a short-term Strong Buy recommendation. Las Vegas Sands reported better-than-expected second quarter results, driven by a robust performance at its Macao business as well as the opening of Marina Bay Sands in Singapore and the benefits of its cost-containment measures.

About Earnings Estimate Scorecard
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/