We remain Neutral on
Wynn Resorts Limited
) following announcement of strong first-quarter 2013 results
last month. However, competitive pressure in Macau keeps us on
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WYNN RESRTS LTD (WYNN): Free Stock Analysis
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Why the Reiteration?
On Apr 25, 2013, Wynn Resorts reported its first-quarter 2013
adjusted earnings of $2.03 per share, which breezed past the
Zacks Consensus Estimate of $1.55 by 31.0% as well as the
prior-year earnings of $1.33 per share by 52.6%. The earnings
upside can be attributed to a strong mass market business in
Macau, continued demand in the Las Vegas market and operational
efficiency. Net revenue grew 5.0% year over year to nearly $1.4
billion bolstered by a respective 4.4% and 6.6% increase in Macau
and Las Vegas revenues.
Macau, which is one of the largest gaming destinations in the
world, has been sluggish in the recent past. Wynn Macau
experienced weakness for three consecutive quarters in 2012.
However, the situation seems to have improved buoyed by the mass
market boom in the recently reported quarter. Moreover, its
pipeline project in the Cotai region of Macau is expected to
expand Wynn's operations in Macau further.
At Las Vegas, the company is experiencing an uptrend as leisure
demand continues to improve with a gradual recovery of the U.S.
economy. Management remains hopeful as average daily rates are
trending higher. Also, in the domestic market, Wynn seeks to
build properties in higher-priced U.S. markets like Philadelphia
and Boston where room rates are very high.
However, despite these enthusiastic facts, some concerns prevent
us from being too optimistic on the stock. Fierce competition in
Macau, the only Chinese city where gambling is legal and which
accounts for around 70% of the company's revenues, remains a
blemish on Wynn's scorecard.
The company's upcoming project at Cotai in Macau will also face
extreme peer pressure from several Chinese casino operators and
the U.S.-based company
Las Vegas Sands Corp.
). Another U.S.-based casino giant,
MGM Resorts International
) is also slated to come up with a casino-resort in Cotai.
Wynn Resorts currently carries a Zacks Rank #2 (Buy). Another
player in the same industry,
Monarch Casino & Resort Inc.
) also looks attractive at current levels with a Zacks Rank #1
(Strong Buy) .