Events such as the FIFA World Cup keep people far from other relaxation exercises since they get busy with that event. Thus, the gambling club chains saw lower income for their latest quarter. Customers’ interests in the football competition kept them far from clubhouses and casinos. Therefore, Wynn Resorts (WYNN, Financial) reported lower than anticipated second-quarter numbers, which did not meet the Street’s estimates.
The details of the quarter
Driven by revenue from Las Vegas operations, revenue surged 6% over last year, clocking in at $1.41 billion. But analysts were expecting it to be at $1.44 billion. Weakness in the Macau market resulted in lower revenue. Macau sales climbed 3.2%, as there were higher table wins of 43.3% in the mass-market segment. But the VIP portion makes the greater part of the income, which dropped 11.7% to $26.4 billion, over a year ago.
Events such as The FIFA World Cup and weakening of the Chinese economy brought in lower revenue. But these do not occur on a regular basis. Hence, Wynn can expect better results next time. Driven by higher revenue from rooms and casinos, the Las Vegas operations grew 12.5% over last year. The bottom line surged 40% to $2.11 per share. This was ahead of the estimates.
As against the peers
However, Las Vegas Sands (LVS, Financial) failed to meet the analysts’ estimates in its second-quarter results. Its top line and the bottom line jumped 11.8% and 27% respectively as compared to the year ago quarter. Las Vegas Sands also witnessed lower revenue in Macau, but its dependence on the mass market category helped revenue grow.
Wynn Resorts continues to formulate strategies to expand and strengthen its presence. Thus, it plans to open a new location on the Cotai Strip, which is expected to be completed by 2016. The resort, called Wynn Palace, will have 1,700 rooms. Also, Las Vegas Sands is building another Cotai resort, called the Parasian. Parasian is a more noteworthy resort with 3,000 rooms and will be open by 2015, which is before the Wynn Palace. Thus, it will provide a tough competition to Wynn.
Wynn also plans to expand in regions such as Japan. Japan is very nearly permitting gambling club resorts in the nation. Thus, all the players would be eyeing this region, with Wynn already putting $4 billion in the locale.
Valuation
Currently, Wynn’s trailing P/E is at 24.86 as compared to the industry average of 26.90. A lower P/E makes Wynn Resorts quite attractive. Moreover, its forward P/E is 20.48, which indicates that the company is expected to earn more in the future. Also, Wynn Resorts’ revenue is expected to grow at the rate of 15.53% in the next five years, which looks impressive. Thus, this company seems to be an attractive bet.
Conclusive thoughts
Along with China, Japan will be a new region to fight for, for all the players. Besides, the new resorts in the Cotai Strip will make the rivalry stiffer. In any case, with individuals betting more, the overall industry seems to be on an uptrend. Moreover, Wynn’s decent results and impressive valuation make it a promising bet.
