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Wynn Resorts (WYNN) Tops Q1 Earnings, Macau Still Weak

Wynn Resorts Ltd. WYNN posted mixed results for first-quarter 2016, with earnings outpacing the Zacks Consensus Estimate but revenues missing the same for the sixth consecutive quarter. Meanwhile, the company registered year-over-year declines in both fronts.

Earnings and Revenue Discussion

Adjusted earnings of $1.07 per share in the quarter plunged approximately 52.9% year over year due to a decline in revenues. Further, it beat the Zacks Consensus Estimate of 83 cents by 28.9%.


Adjusted earnings exclude pre-opening cost, a drop in swap fair value, higher redemption note fair value, and net and property charges.

Wynn Resorts’ revenues of $997.7 million missed the Zacks Consensus Estimate of $1 billion by 0.9%. Reported revenues also dropped 8.6% due to sluggish performance in Macau, partly offset by higher revenues in Las Vegas.

Adjusted property earnings before interests, taxes, depreciation and amortization (EBITDA) declined 7% year over year to $300.3 million on lower revenues. Total operating costs and expenses declined approximately 13.8% to $839.4 million as due to lower casino, and general and administrative expenses.

The company owns and operates casino hotel resorts in Las Vegas and the Macau Special Administrative Region of the People's Republic of China.

Macau Operations

Wynn Resorts reports its Macau table games results under two segments – VIP and mass market.

Wynn Macau revenues tanked 13.8% year over year to $608.2 million in the quarter, owing to lower revenues at both segments.

Notably, gross gaming revenues in Macau declined throughout all the three months of the quarter. In fact, gross gaming revenues have been declining since Jun 2014. The region is struggling due to the Chinese government’s anti-graft corruption drive, which has lowered footfall at the casinos. Also, credit growth concerns, tighter restrictions on visas and a partial smoking ban in casinos were responsible for the decline in revenues from the region.

Table games turnover in the VIP segment plunged 21.4% to $13.5 billion due to a sluggish Macau VIP market. VIP table games win rate (based on turnover) was 2.81%, up 10 basis points (bps) but within the projected range of 2.7% to 3%.

Table drop in the mass market segment was $1.21 billion, down 5.6%. Table games win in the mass market category amounted to $247.5 million, down 11.5%. However, mass market win rate was 20.5%, up 130 bps.

Revenue per available room (RevPAR) fell 5% in the quarter due to a 270-bps decline in occupancy rate and a 2.1% slip in average daily rate (ADR). Non-casino revenues before promotional allowances tanked 13.2% to $76.7 million. In the quarter, adjusted property EBITDA was $160.1 million, down 33.6% due to weakness in the gaming segment.

Wynn Resorts is focused on developing the Wynn Palace Project on the Cotai land in Macau. The resort is scheduled to open in the third quarter of 2016. Currently, the company expects the project to cost around $4.2 billion, of which around $177.5 million was already spent in the first quarter.

Las Vegas Operations

Wynn Resorts’ revenues from Las Vegas operations inched up 0.7% to $389.4 million supported by higher non-casino revenues and increased room revenues. Table games win percentage was 26.3%, up 260 bps, and above management’s guidance range of 21–25%.

Total non-casino revenues, before promotional allowances, increased 0.5% year over year. Room revenues were up 5.5% to $105.1 million backed by an increase in ADR. During the quarter, RevPAR grew 3.4%, while ADR went up 5.3%. However, occupancy rate fell 130 bps to 81.7%. In the quarter, adjusted property EBITDA was down 1.5% to $109 million.

Bottom Line

A weak operating environment in Macau once again hurt revenues for the casino operator, partially offset by an improvement in the Las Vegas segment. Other companies that are suffering from weak performance in Macau are Melco Crown Entertainment Limited MPEL, Las Vegas Sands Corp. LVS and MGM Resorts International MGM.

Wynn Resorts presently has a Zacks Rank #3 (Hold).

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