Wynn reports strong earnings in the U.S. but is dragged down by Macau results

Published Tue, Aug 9 20227:50 PM EDTUpdated Tue, Aug 9 20227:53 PM EDT

Wynn Resorts (WYNN) reported mixed quarterly results Thursday after the closing bell. Operating revenue of $908.8 million missed expectations of $987 million, according to FactSet. An adjusted loss of $0.82 was materially less than estimates for a loss of $1 per share. Bottom line No real surprises in the second quarter as management continues to execute at a high level on everything within their control. Macau results were disappointing, but the company couldn't do anything about China's Covid-related shutdowns. On the other hand, adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) for Las Vegas was at an all-time record, while sales and adjusted EBITDA came in better-than-expected for Boston. Moreover, management's focus on profits instead of spending to grab market at any cost continues to push Wynn Interactive, its online gaming division, toward profitability; the burn rate, or pace of losing money, fell by 33% sequentially. All that said, we're trimming our price target to $100 from $110. We see the continued uncertainty in Macau and the risk of a slowdown in the U.S. as consumer balance sheets continue to normalize toward pre-Covid levels as major headwinds. For its part, the company is monitoring events on the ground, but said it has yet to see a slowdown in Las Vegas or Boston. Second-quarter results by property Macau Results in Macau were significantly impacted by travel-related restrictions in the region as well as Covid "testing and other mitigation procedures." At Wynn Palace, quarterly operating revenue fell roughly 78% year over year to $58.7 million, greatly missing estimates of $174 million. Adjusted property EBITDA was a loss of $49.95 million, down from a profit of $53.6 million last year and a significant miss versus estimates for a profit of $2 million. At Wynn Macau, operating revenue was $58.6 million, a decline of about 68% from last year and a miss versus estimates of $154 million. Adjusted property EBITDA came in at a loss of $40.39 million, down from a $14.1 million profit last year and a miss versus estimates of a $2 million loss. On the call, management stated that "in Macau, the market continues to be very difficult with market-wide GGR [gross gaming revenue] in July only reaching approximately 2% of July 2019 levels." On a normalized basis, Wynn lost $900,000 per day in the region during the quarter; the losses thus far in the third quarter have been trending at around $1 million per day, thanks to a nearly 2-week market-wide casino closure in July. Still, management remains highly optimistic on the opportunity in the region commenting, "longer term, we remain excited about the prospects for Macau with so much pent-up demand for travel and tourism in Asia." Las Vegas Quarterly operating revenue from Vegas operations rose 58% year over year to $561.1 million, beating estimates of $503 million. Adjusted property EBITDA was an all-time record quarterly profit of $226.7 million, up from $133.2 million last year and much better than estimates of a $187 million. Notably, this EBITDA result is 40% above the pre-Covid record delivered in 2014. The EBITDA profit margin was also a record. On the call, management commented: "Looking ahead, while we are keenly aware of the macro environment and the uncertainty facing the economy, we've been encouraged that the strength we have experienced over the past several quarters has continued into Q3." Moreover, the team said forward bookings are pacing at pre-Covid levels, but on a "substantially higher" average daily rate (ADR). While occupancy came in at 91% in the quarter, the team expects to see a seasonal slowdown to the mid- to- high- 80s before reaccelerating to the low 90s in September. Encore Boston Harbor Quarterly operating revenue from this property rose roughly 27% year over year to 210.2 million, outpacing estimates of $201 million. Adjusted property EBITDA profit of $63.7 million was a second-quarter record, up from $46.9 million last year and slightly ahead of estimates for a $60 million profit. Gross gaming revenue in the quarter was a record and on the non-gaming side, management noted "record hotel revenue with particular strength in cash ADR and occupancy." Moreover, while the team is tracking trends closely, they noted that similar to the dynamic in Las Vegas, they see positive momentum continuing into the third (current) quarter. Management said passing of the sports betting bill by the Massachusetts legislature should lead to future growth, and reminded investors that they already constructed the sports betting book in Encore Boston Harbor in 2021. As a result, "expect that retail sports betting will soon be a significant opportunity for property-wide customer acquisition in Boston." Lastly, it's worth noting Wynn did repurchase shares during the quarter. It wasn't a large amount ($137.4 million worth), but when asked about the team's view on buybacks, management commented, "we're not programmatic about buybacks. We repurchased stock when we think it's ridiculously cheap. And during Q2, that was certainly the case, particularly from May through the end of the quarter." Wynn Interactive As a reminder, on their third quarter of 2021 earnings call, management announced a pivot to its digital gaming strategy, stating that the company would no longer play the "land grab" game and spend irrational amounts of money on marketing on poor (in many cases negative) return on investment (ROI) opportunities. Today's release speaks to continued progress on this path to profitability. Wynn's digital gaming platform overall EBITDA burn rate declined to $21 million in the quarter, down from $31.5 million in the first quarter. As a reminder, the burn rate was $79.4 million and $104 million in the in the fourth and third quarters of 2021, respectively. Bausch Health Companies Bausch Health Companies (BHC) reported second-quarter results before the opening bell Tuesday. Revenue came in at $1.97 billion, down 6% on a reported basis and flat organically. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $701 million, down $125 million annually. The company also reduced its full-year revenue outlook to $8.05 billion from $8.22 billion, down from $8.25 billion to $8.40 billion. EBITDA was guided down to between $3.02 billion and $3.12 billion, from $3.225 billion and $3.375 billion. But the numbers are second because the greatest question mark on the stock right now is uncertainty surrounding Xifaxan's patents, which is a situation we remain extremely confounded on based on how confident management believed in their argument. (BHC is defending its patent for Xifaxan, which treats irritable bowl syndrome, against Norwich Pharmaceuticals.) As a reminder, we created a special 4 rating for BHC in May, noting that the lack of clarity makes the stock completely untouchable until more information was known. Unfortunately, between now and then what we learned was that management severely understated the risk of a losing case. At this point, we are maintaining that 4 rating as we await further developments in the Norwich Xifaxan patent litigation, with management stating that they will "vigorously defend" their intellectual property as the two companies continue to battle it out in court. On the call, management commented that they "strongly disagree with the court's anticipated decision and intend to vigorously appeal the outcome," a process they believe will take 12 to 18 months. (Jim Cramer's Charitable Trust is long BHC and WYNN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

People use their smartphones to take photographs outside The Wynn Macau casino resort, operated by Wynn Resorts Ltd., in Macao, China, on Tuesday, Jan. 30, 2018.

Billy H.C. Kwok | Bloomberg | Getty Images

Wynn Resorts (WYNN) reported mixed quarterly results Thursday after the closing bell.

Operating revenue of $908.8 million missed expectations of $987 million, according to FactSet.
An adjusted loss of $0.82 was materially less than estimates for a loss of $1 per share.