VIDEO It’s been a rough stretch lately for Wynn Resorts and unfortunately, it’s not over yet. A big earnings miss last week is only the latest in a string of adverse events and negative publicity for the operator of casinos and resorts in Las Vegas and on the island of Macau in China. ( WYNN - Free Report) A $2.4 billion Wynn hotel and casino in Boston -the Encore Boston Harbor - is expected to open in 2019. Expected to have earned $2.03/share in Q2, Wynn reported a net of only $1.53/share – a 25% disappointment. Revenues lagged as well with the company taking in $1.6B versus an expected $1.7B. Analysts were quick to lower their estimates for the full year 2018 with 6 downgrades in the past 30 days. The Zacks Consensus Estimate for the year now stands at $7.86/share, 7% lower than just 30 days ago when WYNN was expected to earn $8.45/share. Estimates for 2019 have been reduced by a similar percentage. WYNN is now a Zacks Rank #5 (Strong Sell). Steve Wynn, founder of the eponymous casino company was forced to step down from his position as CEO in February amid accusations the he had sexually harassed employees for decades. In March, he liquidated his entire 12% stake in the company, leaving his ex-wife and co-founder Elaine Wynn as the single largest shareholder with a 9% stake. During a protracted and ugly six years of divorce proceedings, Elaine has also been involved in a proxy battle over control of the board of directors. This is Mrs. Wynn’s second proxy fight with the company. She unsuccessfully tried to obtain a seat on the board for herself in 2015. Steve Wynn was extremely valuable to the company as not only the founder and CEO, but also its public spokesperson and its chief visionary. Unfortunately, the stain of the allegations against him remains on the company, both internally and externally. The company filed an 8-K with the SEC last week stating that it had completed its own internal investigation into Mr. Wynn’s alleged misconduct and subsequent settlements with his accusers but would not release the findings until the conclusion of concurrent investigations by the Nevada and Massachusetts state gaming commissions. The Massachusetts investigation is especially troubling for the company because a possible consequence is the revocation of WYNN’s gaming license, which would presumably force a sale of the Boston Harbor property. It’s already been speculated that WYNN has been shopping for a buyer for the new resort, but a forced sale would almost certainly net less than an orderly and voluntary transaction. WYNN is an example – much like Papa John’s ( PZZA - Free Report) – of what can happen when a charismatic founder remains in control of the company and squarely in the public eye. Essentially, all the eggs are in one basket. If the founder takes a fall, the company does as well. It’s been a lean period for the industry, especially operators in Las Vegas who have seen vacation visits drop off as more gaming options become available nationwide, but Investors interested in Gaming stocks would be better served to consider Penn National Gaming ( PENN - Free Report) , a Zacks Rank #2 (BUY) or Caesar’s Entertainment Group ( CZR - Free Report) , a Zacks Rank #3 (HOLD).
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