Wynn Resorts Delivers Gloomy Q3 Results With Macau Providing Expected Disappointment

Posted on: November 6, 2019, 04:09h. 

Last updated on: November 6, 2019, 05:01h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Wynn Resorts Ltd. (NASDAQ:WYNN) was volatile in Wednesday’s after-hours session, moving between losses and gains, after the company reported third-quarter results that came in well short of Wall Street expectations.

As expected, Macau was a big drag on Wynn Resorts’ third-quarter numbers. (Image: South China Morning Post)

The operator of the Encore and the Wynn on the Las Vegas Strip reported a loss of three cents a share for the July through September period on revenue of $1.65 billion. That loss was on the basis of generally accepted accounting principles (GAAP). Analysts were expecting earnings of 83 cents per share on turnover of $1.67 billion. On a non-GAAP basis, the gaming company earned 17 cents, well below the 90 cents forecast by analysts.

As was widely expected, Macau was a drag on Wynn’s results. In September, the company slashed its adjusted property earnings before interest, taxes, depreciation and amortization (EBITDA) and revenue forecasts for July and August on the peninsula, indicating that its third-quarter numbers in the world’s largest gambling hub would be weak.

Operating revenues decreased $132.4 million and $105.3 million at Wynn Palace and Wynn Macau, respectively, from the third quarter of 2018,” said the company in a statement.

In the third quarter, those two properties combined for $1.09 billion of the operator’s $1.65 billion in total operating revenue, underscoring the importance of the Special Administrative Region (SAR) to Wynn’s financial results.

VIP Woes

Few, if any, of the major Macau players are as levered to VIPs as is Wynn, and that sensitivity was on display in the most recently completed quarter.

Table games turnover in VIP operations was $10.52 billion, a 32.3 percent tumble from the year-earlier period, according to the company. While table game wins as a percentage among high-end gamblers on the peninsula was higher by almost 3.20 percent last quarter, the comparable metric among mass market players declined 9.2 percent.

Wynn remains committed to the peninsula and expects the renovated West Casino at Wynn Macau, one of its newest investments there, to be ready by the end of this year.

Other Weak Spots

Macau wasn’t the only drag on Wynn’s September quarter results. The company said adjusted property EBITDA in Las Vegas fell 7.6 percent to $88 million, below the consensus estimate of $102 million. There are some signs that Wynn’s Strip business could pick up over the coming quarters as enhancements come online.

“Our strategy at Wynn Las Vegas continues to bear fruit, as we increased market share in our domestic gaming business and drove nearly 4% year-on-year growth in revenue per available room (RevPAR),” said CEO Matt Maddox in a statement.

Maddox added that the company’s 430,000 square-foot meeting space expansion is slated to open in the first quarter of next year, and that “feedback from meeting planners has been very encouraging.”

The July through September time frame was the first full quarter of operation for Encore Boston Harbor, Wynn’s newest gaming property. Although that venue has become a leader among New England casinos, it wasn’t immune from disappointing results. Third-quarter adjusted property EBITDA at that integrated resort was $7.7 million, missing the $15 million analysts expected.

As of this writing, Wynn shares were higher by 1.85 percent in after-hours trading. The stock is up more than 23 percent year-to-date.