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Wynn Resorts Ltd. (WYNN - Analyst Report) reported second quarter 2012 adjusted earnings of $1.38 per share, lagging the Zacks Consensus Estimate of $1.48 as well as prior-year earnings of $1.60. On a GAAP basis, earnings per share were $1.37 versus 97 cents in the comparable quarter last year.

Net revenue plunged 8.4% year over year to $1,253.2 million, missing the Zacks Consensus Estimate of $1,326.0 million. Weedy performances both at Las Vegas and Macau hit Wynn Resorts badly in the quarter.

Macau Operations

Net revenue at Wynn Macau was $907.6 million in the quarter, down 7.1% year over year, due to a decline in both VIP table and mass market table games.  

The table games turnover in the VIP segment declined 7.2% from the prior-year period to $30.3 billion. VIP table games win was 2.79% based on turnover, down from the expected range of 2.7% to 3.0% as well as the year-ago level of 2.89%.

Table games in the mass market category also decreased 2.7% year over year to $671.8 million. However, the mass market table games win rate was 29.8%, which was higher than the expected range of 26% to 28% and year-earlier rate of 27.8%.

Average daily rate (ADR) at Wynn Macau was $317, slightly up from $314 in the year-ago quarter. The property’s occupancy level was tweaked to 90.0% from 90.5% in the prior-year quarter. Combining both the effects, revenue per available room (REVPAR) nudged up 0.4% year over year to $286.

Wynn Resorts currently comprises 504 tables (290 VIP tables, 203 mass market tables and 11 poker tables) and 939 slot machines in Macau.

Las Vegas Operations

Wynn Resorts’ revenue from Las Vegas operations took a deeper plunge of 11.6% year over year to $345.6 million as net casino revenue tumbled 37.7% from the prior-year period to $98.6 million. However, gross non-casino revenue increased 5.5% year over year to $290.7 million, buoyed by improved revenues from the hotel and food and beverage segments, offset somewhat by lower retail and entertainment sales.

During the quarter, Wynn recorded a 5.6% year-over-year increment in room revenues. Average daily rate (ADR) rose 5.6% to $254, but occupancy slipped to 87.6% from 89.2%. Both the matrices led to REVPAR growth of 3.8% to $222.

Balance Sheet

At the end of the quarter, Wynn Resorts’ total cash balance was $1.9 billion. Total debt outstanding was $5.5 billion.

Our Take

Economic slowdown both at China and the U.S. dampened Wynn Resorts’ second-quarter 2012. Less discretionary spending by VIPs in Macau in response to the global economic turmoil faded the strong casino momentum in Mainland China. Moreover, the competitive environment is heating up at both marketplaces. The company faces stiff competition from peers like Las Vegas Sands Corp. (LVS - Analyst Report) and MGM Resorts International (MGM - Analyst Report).

However, we remain hopeful on the company’s ability to execute in a difficult operating environment. Wynn is still to explore the Chinese market with its Cotai project.

Wynn Resorts currently retains a Zacks #3 Rank that translates into a short-term Hold rating. We are maintaining our Neutral recommendation on the stock over the long term.


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