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Red Rock (RRR) Stock Up 47% in 3 Months: More Upside Left?

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Red Rock Resorts, Inc. (RRR - Free Report) is poised to benefit from its cost-saving initiatives, Las Vegas operations, and Palace Station and Palms redevelopment projects. This along with increased focus on reopening of properties bodes well.

Shares of Red Rock have gained 47.4%, outperforming the industry’s 20.1% growth in the past three months. Moreover, an upward revision in earnings estimates for 2021 reflects analysts’ optimism in the company’s growth potential. Over the past 30 days, the Zacks Consensus Estimate for its 2021 earnings has moved up 16.5% to 92 cents per share.

Factors Driving Growth

Red Rock continues to benefit from initiatives such as streamlining of operations, optimization of marketing initiatives, and renegotiating vendor and third-party agreements. Going forward, the initiatives are not only going to support efficient production but are also likely to drive margins and free cash flow.

During the third quarter of 2020, the company continued with the phased reopening program and operated properties of Red Rock, Green Valley Ranch, Santa Fe Station, Boulder Station, Palace Station and Sunset Station together with its Wildfire properties and the Graton Casino Resort. Notably, the openings were subjected to state-mandated occupancy and social-distancing protocols.

Also, the company banks heavily on the Palace Station and Palms redevelopment projects. Following the redevelopment in 2018 and 2019, the company witnessed solid top-line growth. Notably, the company is optimistic about its future performance as well.

Meanwhile, Red Rocks’ Las Vegas operations have been a key growth driver over the past few quarters and the trend is likely to continue in the coming quarters. Although the segment’s revenues declined in the third quarter of 2020 due to the pandemic, the company is confident about a quick rebound in its Las Vegas business. Moreover, attributes such as best-in-class assets and locations, unparallel distribution and scale along with solid organic development pipeline are likely to benefit the company.

Nonetheless, Red Rock Resorts’ healthy balance sheet is likely to help it tide over the ongoing crisis. As of Sep 30, 2020, the company had nearly $108.9 million in cash. Moreover, the company’s long-term debt at the end of third-quarter 2020 was $3 billion, compared with $3.3 billion as of Jun 30, 2020. Notably, the company paid back $285.6 million in debt along with an additional $53 million, thereby bringing down its debt to pre-pandemic levels. At the end of third-quarter 2020, the company had a debt-to-capital ratio of 0.8, which indicates manageable debt levels.

Zacks Rank & Other Key Picks

Red Rock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Other top-ranked stocks in the Zacks Consumer Discretionary space include YETI Holdings, Inc. (YETI - Free Report) , Monarch Casino & Resort, Inc. (MCRI - Free Report) and Golden Entertainment, Inc. (GDEN - Free Report) . YETI Holdings and Monarch Casino sport a Zacks Rank #1, while Golden Entertainment carries a Zacks Rank #2 (Buy).

YETI Holdings has a three-five year earnings per share growth rate of 18.3%.

Monarch Casino and Golden Entertainment’s earnings for 2021 are expected to surge 202.5% and 91.6%, respectively.

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