Wynn Resorts Ltd. (NASDAQ; WYNN)
Wynn Resorts Surprised Investors
Wynn Resorts Ltd, surprised investors Wednesday with weak first quarter earnings along with a significant quarterly dividend cut of 67%. The Las Vegas headquartered gaming giant traded lower by over 15% in Wednesday’s session.
The Company reported that quarterly profit plummeted to .70 cents a share, a significant miss from the $1.19 expectation for this quarter. Adding to the disappointment, revenue reported was $1.09 billion, weaker than analyst’s expectations of $1.21 billion. Both a top and bottom line earnings miss resulted in the .50 cent slash in the dividend payout.
Macau: The Real Problem
Macau, the world’s well known gambling destination, experienced a 50% collapse in revenue from a year prior due to an anti-corruption crackdown implemented by Chinese President, Xi Jinping. Since Macau is the only place in China where gambling is legal it attracts the flow of money movement out of the country, circumventing strict currency regulations.
The biggest detriment stemming from this is that the high roller clients of Macau are now spending less to steer clear of drawing unnecessary attention during the Chinese government’s recent campaign. Unfortunately, in the current setting, Wynn Resorts is suffering greatly as is the rest of Macau. What’s more is the Las Vegas properties don’t begin to put a dent in the loss experienced in Macau.
Analyst Comments
TheStreet analyst team had the following comments:
“We rate WYNN RESORTS LTD (WYNN) a HOLD. The primary factors that have impacted our rating are mixed – some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is it is expanding profit margins over time. At the same time, however, we also find weaknesses including unimpressive growth in net income, feeble growth in the company’s earnings per share and a generally disappointing performance in the stock itself.”
Additional highlights from several other analyst firms can be viewed here: Benzinga
Future Growth
Steve Wynn, President and CEO of Wynn Resorts Ltd, spoke about the company’s commitment to Macau:
“The Company is currently constructing Wynn Palace, a fully integrated resort containing a 1,700-room hotel, performance lake, meeting space, casino, spa, retail offerings, and food and beverage outlets in the Cotai area of Macau,” the company wrote in its earnings release. “In July 2013, we signed a $2.6 billion guaranteed maximum price (GMP) contract for the project’s construction costs. The total project budget, including construction costs, capitalized interest, pre-opening expenses, land costs and financing fees, is approximately $4.1 billion. We expect to open our resort on Cotai in the first half of 2016.”
