We are upgrading our rating on Wynn Resorts, Limited (WYNN) — a developer and operator of high-end hotels and casinos in Las Vegas and Macau — to Outperform from Neutral.
The rating upgrade is based on strong growth momentum in Macau, which is the world’s largest gambling market. Wynn Resorts generates 65% of its revenue from Macau. In December, Macau casino revenue surged 66% as more Chinese tourists visited the city, thus boosting the earnings of the company. Wynn Resort also has a potential Cotai project in the pipeline, which will further expand its operations in Macau.
Wynn Resorts is also experiencing an increase in demand with a gradual recovery of the global economy. Business travelers are returning, with leisure demand increasing as well. The Las Vegas business is also rebounding with room rates increasing which was worst hit by the slowdown.
The convention bookings in Las Vegas continue to show signs of improvement in 2011. Management expects group bookings to account for 18%-19% of total 2011 occupancy.
Moreover, we remain encouraged by the company’s strong brand name, healthy balance sheet, strong cash flow position, relatively low capital requirements and ability to execute in a difficult operating environment.
Earnings Estimate Revisions: Overview
Following the upside in Macau casino revenue and stabilization in the Las Vegas market, the Zacks Consensus Estimate for the company has increased, with the analysts remaining bullish on the stock. The earnings estimate details are discussed below.
Agreement of Estimate Revisions
Revision trends in the last 30 days drifted toward the positive side. For fiscal 2010, 5 out of 19 analysts covering the stock raised their estimates and for fiscal 2011, 6 out of 23 analysts increased their estimates. None of the analysts reduced their estimates for 2010 and only one analyst trimmed his estimate for 2011.
In the last 7 days, 2 analysts upped their estimates for both 2011 and 2012, and none of the analyst moved in the opposite direction.
The analysts have raised the estimates based on strong growth potential of Macau and expect the company to benefit from its strong presence in the market. Macau, the only Chinese city where gambling is legal, is attracting visitors from all over the world resulting in improvement in both visitation and spend per visit.
Magnitude of Estimate Revisions
The earnings estimates have climbed by 6 cents to $1.72 for fiscal year 2010 and by 10 cents to $2.44 for fiscal 2011, over the last 30 days.
WYNN RESRTS LTD (WYNN): Free Stock Analysis Report
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