Key Takeaways From Wynn Resorts Earnings

by Trefis Team
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Wynn Resorts (NASDAQ: WYNN) recently reported its Q2 earnings. The strong performance of the new Wynn Palace property and the VIP segment at Wynn Macau helped the casino operator beat consensus estimates. The return of VIP gamblers in Macau also aided hotel revenues by driving occupancy rates. Wynn Las Vegas saw its EBITDA go up by 8% in the quarter. We expect Wynn to see strong growth in the next few quarters, as Wynn Palace has been outperforming its peers. Additionally, major construction projects – including a ferry terminal – are likely to be completed in the next few months, which will increase footfall to Wynn Palace in Cotai. However, we also believe that this growth will moderate after the opening of MGM Cotai in Q3’17, and increased competition from Las Vegas Sands and other local casinos in the region.

Wynn Palace Revenues Declined Sequentially

Wynn Palace’s revenues declined by nearly 13% sequentially despite the strength in the region’s gross gaming revenues (GGR). Las Vegas Sands’ Parisian Macau outperformed Wynn Palace this quarter, as its revenues grew by about 15% in Q2. The main positive from this quarter for Wynn was that after nearly two and a half years, its other casinos in the region witnessed revenue growth due to improved industry metrics. As a result, Wynn’s overall revenues increased by nearly 45% to $1.53 billion in Q2. Although the company’s revenues increased strongly, Wynn’s earnings growth was moderate due to high discounts offered at Wynn Palace. Wynn’s net profits from its Macau operations were partially offset by an increase in interest expenses as Wynn is no longer capitalizing interest on Wynn Palace.

Competition Intensified in Macau, But Traffic Could Surge Due To Ferry Terminal

MGM Resorts is scheduled to open its new Macau casino in the third quarter of 2017, which will only add to the competition that Wynn is facing. Accordingly, Wynn is unlikely to see similar rates of growth going forward because of the mounting competition in the region. With that said, traffic is likely to increase in the Cotai strip due to the completion of the Ferry terminal and other infrastructure projects in the region.

For our model and valuation, please refer to our complete analysis of Wynn Resorts

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