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Wynn (WYNN) Up 25.3% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Wynn Resorts (WYNN - Free Report) . Shares have added about 25.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Wynn due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Wynn Resorts Q2 Earnings & Revenues Miss Estimates 

Wynn Resorts reported second-quarter 2020 results, wherein both earnings and revenues missed the Zacks Consensus Estimate for the fourth straight quarter. Following the results, not much movement was observed in the company’s share price in after-hour trading session yesterday.

The company reported an adjusted loss of $6.14 per share, wider than the Zacks Consensus Estimate of a loss of $4.89. In the prior-year quarter, the company had reported adjusted earnings per share of $1.44. In the reported quarter, the bottom line was hurt by operating loss at Encore Boston Harbor, Wynn Palace, Wynn Macau, Las Vegas operations and Encore Boston Harbor. Results in the quarter were negatively impacted by the coronavirus induced shutdowns in Las Vegas and dismal traffic in Macau.

Revenues of $85.7 million lagged the Zacks Consensus Estimate of $303 million. The top line also declined 94.8% thanks to dismal performances by Wynn Palace, Wynn Macau and Las Vegas operations. The company’s operations were impacted by the coronavirus crisis.

The company has resumed operations at each of its markets. In early June, the company reopened its entire Wynn Las Vegas and Encore campus. Meanwhile, in Boston, the company reopened Encore Boston Harbor on July 12.

The company’s Wynn Palace and Wynn Macau resumed operations following a closure of 15 days in February. However, traveler isolation, limited number of seats per table game, slot machine spacing, temperature checks, mask protection, the coronavirus negative test result requirements for entry into gaming areas, and health declarations remain in place at the moment.

Wynn Palace Disappoints

Revenues from Wynn Palace totaled $8.7 million in the second quarter, down 98.6% year over year. Casino revenues were ($11.4) million, down 102.2%. Rooms; food and beverage; and entertainment, retail and other also declined 94.4%, 85.3%, 52.5%, to $2.4 million, $4.2 million and $13.5 million, respectively.

At the VIP segment, table games turnover was $1.7 billion, down 87.2% year over year. VIP table games win rate (based on turnover) was (1.73%), below the expected range of 2.7-3%. It was also lower than 3.02% witnessed in the year-ago quarter. Table drop at the mass market segment was $22 million, down 98.3% from the year-ago quarter. Furthermore, table games win in mass market operations amounted to $7.2 million, down 97.6% year over year.

Notably, average daily rate (ADR) was $339 (up 27.9%). Occupancy was 4.4% (97.4% reported in the prior-year quarter). Meanwhile, revenue per available room (RevPAR) was $15 (down 94.2%).

Wynn Macau Operations

Wynn Macau revenues were down 97.8% year over year to $11.9 million in the second quarter on account of decrease in casino, rooms, food and beverage, and entertainment, retail and other revenues.

Notably, casino revenues in the reported quarter plunged 100.7% to ($3.5) million. Rooms; food and beverage; and entertainment, retail and other revenues declined 90.1%, 81.7% and 51.3%, to $2.6 million, $3.7 and $9.1 million, respectively.

Table games turnover at the VIP segment declined 93.5% to $607.1 million. Meanwhile, the VIP table games win rate (based on turnover) was (2.0%), lower than expected range of 2.7% to 3.0%. It was also below 3.30% in the prior-year quarter.

Table drop at the mass market segment was $40.8 million, down 97% year over year. Table games win in the mass market category was $3.4 million, down 98.8%.

Notably, ADR was $342 (up 21.7%). Meanwhile, occupancy was 7.5% compared with 98.9% in the prior-year quarter. RevPAR was $25, down 91%.

Las Vegas Operations

Revenues from Las Vegas operations were down 86% year over year to $64.9 million in the quarter under review. The downside can primarily be attributed to the coronavirus-induced shutdowns.

Casino and food and beverage revenues plunged 79.7% and 90.3% to $24.4 million and $16.1 million, respectively. Rooms and entertainment, retail and other revenues also decreased 90.3% and 76.6% to $12.4 million and $12.1 million, respectively.
    
Further, table games drop fell 79.4% to $90.9 million. Meanwhile, table games win witnessed a sharp decline of 85.8% year over year to $17.9 million. Table games win percentage of 19.7% was down from 28.7% in the year-ago quarter and also below the projected range of 22-26%.

During the reported quarter, RevPAR declined 67% to $99. Occupancy rate was 43.7%, down from 90.1% from the prior-year period. ADR was $226, down 32.1%, year over year.

Encore Boston Harbor

Encore Boston Harbor closed all its operations on Mar 15 for remainder of first quarter and second-quarter 2020. On Jul 12, Encore Boston Harbor reopened its operations. Adjusted property EBITDA from Encore Boston Harbor for second-quarter 2020 was ($53.8) million.

Operating Performance

Adjusted property earnings before interests, taxes, depreciation and amortization (EBITDA) was ($322.9) million. In the prior-year quarter, the company had reported adjusted property EBITDA of $480.6 million.

In the quarter under review, adjusted property EBITDA from Macau totaled ($193.6) million, against $343 million reported in the prior-year quarter. Adjusted property EBITDA from Las Vegas operations was ($75.6) million, against adjusted EBITDA of $137.4 million.

Cash Position

As of Jun 30, 2020, Wynn Resorts’ cash, cash equivalents and restricted cash totaled $3.8 billion.

Outstanding debt at the end of the second quarter amounted to $12.78 billion, including $3.12 billion of Wynn Las Vegas related debt, $5.94 billion of Macau debt, $3.11 billion of Wynn Resorts Finance debt, and $612 million of debt held by the retail joint venture, which the company consolidated.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -36.28% due to these changes.

VGM Scores

Currently, Wynn has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Wynn has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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