Wynn Resorts (WYNN, Financial) saw a significant drop of 8% after missing Q3 earnings and sales estimates. Despite strong demand in key markets like Las Vegas and Macau, which together contribute about half of the company's annual revenue, the results were disappointing.
The company's performance was impacted by challenging year-over-year comparisons and ongoing room renovations. These renovations have taken thousands of room nights out of service, and investors are concerned that 2025 may mirror 2024 in terms of group room nights, potentially affecting future quarterly numbers. This overshadowed positive aspects like WYNN's $1.0 billion increase in its share repurchase authorization, about 10% of its market cap.
- WYNN missed top and bottom-line estimates for the second consecutive quarter, with adjusted EPS of $0.90 on a 1.3% revenue increase year-over-year to $1.69 billion. Las Vegas operating revenue decreased by 1.9% to $607.2 million due to a slight drop in table hold. In contrast, Boston's revenue rose by 1.8% to $214.1 million.
- Rising labor costs, particularly in Las Vegas, have impacted profitability. In Q3, wage pressures led to a 210 basis point contraction in EBITDAR margins year-over-year in Las Vegas to 33.4%. However, Boston saw a 60 basis point improvement in margins due to cost efficiencies.
- In Macau, revenue improved by 6.3% year-over-year to $871.7 million, aided by stable table games hold. If this trend continues, WYNN could see a 16% increase in Macau revenue year-over-year for FY24. Despite a 90 basis point contraction in EBITDAR margins year-over-year, they improved by 210 basis points compared to Q3 2019, reflecting higher payroll costs.
- WYNN remains optimistic about Macau's long-term prospects and is advancing its hotel/casino project in the UAE, which it believes could become a $3-5 billion gaming market. The company is also exploring opportunities in other attractive cities.
Despite several positive developments, WYNN's overall Q3 performance was underwhelming. Concerns about China's economic situation pose a significant challenge, as the region's economy weakens, increasing reliance on government stimulus. Other industry players, like Las Vegas Sands (LVS, Financial) and MGM Resorts (MGM, Financial), also face similar issues but remain optimistic about continued demand.
