Shares of Wynn Resorts fell more than 9 percent on Thursday after the casino operator turned in a disappointing third-quarter performance at its Macau operations.
Wynn's quarter was reported after the close Wednesday and revealed its Macau operation was hurt by weaker-than-expected results from its new Wynn Palace, a resort in the Chinese colony's Cotai district that opened Aug. 22.
Wynn Resorts President Matt Maddox indicated that "the ramp-up at Wynn Palace is clearly taking a little longer than we expected."
Despite Thursday's decline, Wynn shares are still up more than 26 percent so far this year.
"The ramp at Palace and cannibalization at Wynn Macau may be challenged for six (and probably 18) months," said Nomura analyst Harry Curtis in a note late Wednesday. "Wynn's lack of mass marketing prior to opening was a mistake in our view given fierce competitive dynamics in the market."
Wynn Resorts generated adjusted earnings per share of 75 cents per share in the quarter, short of the average 78 cents per share that analysts had forecast, according to Thomson Reuters.
The Las Vegas-based parent company's adjusted earnings before interest, taxes, depreciation and amortization (EBITDA, or essentially operating cash flow) was up 9 percent in the quarter to $305.4 million, with the total Macau operations generating $176.5 million and the Vegas operations nearly $129 million. The Street had been looking for the Macau operations to generate EBITDA of $196 million.
Wynn said revenues companywide were up 11 percent to $1.11 billion from $996.3 million a year earlier, but strength from its Las Vegas operations were offset by weakness from the Macau business. The Wynn Palace generated $164.6 million in revenue during its six weeks in operation, which was below the $169 million analysts had forecast.
Management on the earnings call indicated that construction disruptions nearby were a factor in the stumble at the new Cotai property.
"What we have is an anomalous situation where all four sides of our property are currently…being enclosed by either barricades or construction blockades of one kind or another," said Wynn Resorts Chairman and CEO Steve Wynn. "It has tended to isolate our property on all four sides, and it's made access to the Palace temporarily highly encumbered."
According to Wynn, one of the barricades was erected by MGM as part of work it's doing on a new casino scheduled to open in the spring.