The mecca of casino gaming, Macau, has finally returned to life. In fact, gaming revenues in the region grew on an annual basis in September to register 14 consecutive months of gains, following the extended slump of over two years. Notably, new resorts continue to attract high rollers as well as leisure gamblers.
Meanwhile, notwithstanding the recent shooting massacre in Las Vegas, casino players’ properties therein are expected to continue to cash in on the favorable trends of an improving employment rate and positive tourism numbers. In fact, the Las Vegas Strip has been recording high occupancy rates over the past few years.
Therefore, given the upbeat macro environment trends, this makes it the right time to add casino companies to your portfolio. Leading developer, owner and operator of casino resorts, Wynn Resorts, Limited (WYNN - Free Report) is one such stock, which is worth considering.
Notably, shares of Wynn Resorts have soared 69.9% year to date compared with the industry’s growth of 28.1%.
Moreover, the Zacks Consensus Estimate for Wynn Resorts’ current-year earnings has moved up nearly 1%, reflecting three upward revisions versus two downward, over the last 60 days. Also, the next year’s earnings estimates have climbed 2.3% on the back of six upward revisions versus no revision in the opposite direction.
In fact, all these positive earnings estimates revision testifies analysts’ unwavering confidence on the company and also substantiates its Zacks Rank #2 (Buy).
This apart, Wynn Resorts continues to reflect strength in several areas and should thus make a value addition to your portfolio.
Earnings & Revenue Growth: Wynn Resorts’ current-year revenues are anticipated to increase 35.1% year over year, widely outpacing the industry’s projected average growth of 1.4%.
Strong top-line growth is expected to translate to an even more robust bottom-line performance. Evidently, the company’s projected EPS growth is a whopping 46.8% compared with the industry average of 18.7%.
Arguably, nothing is more important than earnings growth as surging profit levels is often an indication of strong prospects (and stock price gains) ahead for the company in question.
Focus on Non-Gaming Revenues: Apart from the gaming business in Macau, the company has been increasingly focusing on boosting non-gaming revenues. Given the decent visitation pattern in Macau, infrastructure development and government’s efforts to increase tourism in Macau, non-gaming sources are anticipated to boost revenues, going forward.
Additionally, Wynn Resorts’ full-scale integrated resort — Wynn Palace — opened in August 2016 in Cotai, Macau. The resort is poised to witness increased visits from tourists and leisure gamblers over the long term, which should fortify the company’s position in the Cotai strip. Notably, such projects are expected to draw business and leisure travelers, and provide a solid platform for growth. In fact, building resorts in Asia is expected to help the company capitalize on the strong consumer spending trend in the region.
Expansion in Domestic Market: In order to boost performance in Las Vegas, the company has remodeled rooms at its properties and the baccarat pit. Also, Wynn Resorts’ casino resort that is anticipated to open in Massachusetts in 2019 is likely to strengthen its presence in the U.S. market. Further, it plans to start building Wynn Paradise Park by year-end or early 2018, taking over a footprint that includes the Wynn Golf Club comprising restaurants, hotels and other entertainment options. Backed by the optimism surrounding tourism in Las Vegas and increasing visitation pattern, the company’s revenues are likely to grow as well.
Favorable ROE: Wynn Resorts delivered return on equity (ROE) of a whopping 165.8% in the trailing 12 months compared with the industry’s gain of 7.5%. This supports its growth potential and indicates that the company reinvests more efficiently compared with its peers.
Wynn Palace is likely to face extreme peer pressure from several local Chinese casino operators as well as the The Parisian Macao (opened in September 2016) and the Sands Cotai Central project of Las Vegas Sands Corp. (LVS - Free Report) . Another US-based company, MGM Resorts International’s (MGM - Free Report) $2.9 billion casino hotel is also set to open in Cotai in the fourth quarter of 2017. We believe these openings might pose a huge threat to the company’s business in the region in the future.
Nevertheless, given the company’s solid fundamentals, strong brand recognition, increasing market share, focus on non-gaming revenues and a fairly favorable macro environment, the stock should keep performing well in the quarters ahead, thus making it a top investment choice.
Another stock worth considering in this sector is Churchill Downs Incorporated (CHDN - Free Report) holding the same bullish rank as Wynn Resorts. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Churchill Downs’ current-year earnings climbed nearly 1% over the last 60 days. Further, for 2017, EPS is expected to increase 22.6%.
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