Wynn Q4’16 Earnings: 2016 Ended On A High But Competition Intensifies In Macau

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Wynn Resorts

Wynn Resorts (NASDAQ: WYNN) reported its Q4’16 earnings on of January 26th and results beat consensus estimates by around $50 million. Wynn’s Q4’16 earnings grew nearly 37% as its newly opened casino outperformed LVS’s Parisian Macau this quarter. This was complemented by the recovery in Macau’s gaming industry and partially offset by slight decline in Wynn’s other casinos and Macau and Las Vegas. Although Wynn was able to take advantage of improved market conditions this quarter, the competition in the region is likely to grow due to the opening of MGM’s new casino in the region later this year. However, we believe that Wynn is well prepared to counter any such situation as it has added diversified sources of revenues from its existing and new casinos.

 

Wynn Palace Triggered Q4’16 Growth But Competition Intensifies In Macau

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Wynn’s Q4’16 earnings grew nearly 37% on the back of its newly opened casino Wynn Palace, which helped it overcome the downturn in the Macau casino industry that continued in the first half of 2016. Visitations in the region continued to increase in Q4’16 as the region’s GGR (Gross Gaming Revenue) grew nearly 12%. Wynn Palace performed better than its rival Parisian Macau as Wynn’s revenues grew 37%, whereas LVS revenues grew only 12%. The revival of Macau gaming industry is likely to boost its 2017 revenues. However, Wynn may not be able to garner full potential on its new casino for long, as competition in the region is likely to intensify due to the opening of MGM’s casino in Cotai strip this year and some other new casinos in the region belonging to Galaxy and LVS.

 

Diversified Revenue Streams Add Stability To Wynn Growth

Wynn’s full year revenues grew by nearly 9% due to improvement in Macau’s GGR in the later half of 2016 and opening of its new casino Wynn Palace in Q3’16. Hotel revenues and entertainment and retail contributed about 25% of Wynn’s overall revenues and grew significantly from their 2015 levels. This was primarily due to the opening of Wynn Palace, which added about 4000 new hotel rooms and major nongambling attractions. Wynn also modified its arrangement of tables in order to maximize profits from its casinos and took steps to attract premium mass market customers. We believe that reducing its reliability on VIP gaming and adding other revenue streams will provide stability to Wynn’s growth in the coming years.

We are currently reviewing our valuation model for Wynn in the light of the recent earnings and will have an update soon.

 

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis of Wynn Resorts

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