Wynn is almost back in Macao and crushing it in Vegas even before Super Bowl, Chinese New Year

Published Wed, Feb 7 20249:05 PM EST

Wynn Resorts posted beats on its top and bottom lines in the fourth quarter. In results released after the closing bell Wednesday, both Macao locations and Las Vegas were strong while Boston Harbor was essentially in line with expectations. The Club stock moved higher in after-hours trading. Operating revenue for the three months ended Dec. 31 increased 83% year-over-year, to $1.84 billion, outpacing expectations of $1.74 billion, according to estimates compiled by LSEG. Adjusted earnings-per-share (EPS) came in at 1.91 per share, outpacing the LSEG consensus estimate of $1.15 and reversing a loss in the year-ago period. Adjusted property EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs) — Wynn's key metric for profitability — surged 223% year-over-year, to a new record of $630 million, well ahead of the $548 million consensus estimate, according to FactSet. WYNN 1Y mountain Wynn Resorts 1 year Bottom line Macao is back on track with a better profit margin profile than ever before after a stumble in the prior quarter, Las Vegas is firing on all cylinders, and Boston Harbor remains resilient. It appears the strength in the fourth quarter has carried over into the current (first) quarter in all three locations. Las Vegas stands to benefit from the Super Bowl and Chinese New Year coming this weekend, the latter of which should certainly give Macao properties a boost as well. While Boston Harbor isn't showing quite as much growth as the other two locations, the team highlighted buoyant demand in January. They see good progress in getting the needed approvals to expand the operations footprint. Not much update on Wynn Al Marjan in United Arab Emirates (UAE), which broke ground this year, except to say that management continues to view it as a "very substantial opportunity." The stock is trading around the lower end of the valuation range prior to Covid, at 10 times enterprise value to forward EBITDAR. Shares are cheap on a valuation basis, considering Wynn is operating at improved levels of profitability and all operating regions are strong or getting stronger, plus the upside expected Al Marjan in the future. Therefore, we continue to like shares at current levels and reiterate our buy-equivalent 1 rating and $125 price target. Quarterly commentary Here's a closer look at how each operating region and segment performed in the fourth quarter, starting with Macao. Macao We're happy to see the strong top-line performance in both Macao locations, even if Wynn Palace's adjusted EBITDAR came up a tad bit short. Sales are the focus here as they speak to strong demand, a key concern given the economic weakness in China, the world's second-largest economy. Total adjusted EBITDAR of $297 million (Wynn Palace and Wynn Macao added together) represents about 85% of Wynn's pre-Covid fourth quarter 2019 level of $348 million in the Chinese special administrative region. Breaking that down, Wynn Palace was still a bit further ahead in its recovery but Wynn Macao is quickly gaining ground. Wynn Palace generated $178 million in EBITDAR in the fourth quarter of 2019. So, given the fourth quarter of 2023's result of $171 million, Wynn Palace is pretty much back. While adjusted EBITDAR did come up a bit short, the Street was expecting a slight sequential decline, so no real concerns there. Perhaps more important as far as investors are concerned is Wynn Macao – a key weak spot last quarter that put pressure on shares – is back on track. The property exceeded expectations for both sales and adjusted EBITDAR, while demonstrating significant 31% growth on a sequential basis. In 2019, Wynn Macao generated $170 million in fourth quarter adjusted EBITDAR. 2023's fourth quarter result represents about 74% of that level. So, there's still more work to do but it's certainly headed in the right direction. While Macao in total may have some top-line growth left to go before hitting 2019 levels, the properties are running at structurally higher profit margins than what we saw back then. So, when those sales do come back online, the EBITDAR stands to be well in excess of where they were pre-Covid. Guidance: Regarding the current quarter, the first quarter of 2024, management said on the post-earnings call, "The strength in our business there has continued into Q1, and in the casino, our mass drop per day in January increased 32% versus January 2019 and was up sequentially versus Q4. On the non-gaming side, our hotel occupancy was 99%, and along with continued strength in tenant retail sales. Overall, strong top line performance, combined with disciplined OpEx (operational expense) control drove healthy margins during January." Las Vegas Las Vegas is simply crushing it, beating on both sales and profit, benefiting from Las Vegas' inaugural F1 race, which was held back in November. Vegas sales were up 19% year over year and profit was up 24%. Adjusted EBITDAR of $271 million represents an all-time quarterly record with the team noting that "while F1 was clearly a contributor, activity at the property was intense throughout the quarter, with RevPAR [revenue per available room] table drops, slot handle and food and beverage revenue all well above what was a very strong quarter in 2022." It didn't all happen in a concentrated period of time, like around the F1 event, with management adding that Wynn Las Vegas had its best October, best November, and best December in terms of fourth-quarter profitability. Guidance : Better yet, in terms of the current quarter, the team said while January was very strong, "January isn't where the action is this quarter. It's all about February. Super Bowl, Chinese New Year, and for us, the best February in our history for grouping convention. Between the Super Bowl and Chinese New Year, we have doubled the front money and credit that we had in 2023, and we expect record hotel revenue over the Super Bowl. So, a very active February will set the comp for the first quarter." Encore Boston Harbor Wynn's Boston property was relatively stable, up slightly on an annual basis, and more profitable than expected as we can see from the marginal sales miss and adjusted EBITDAR beat. Guidance: As for the current quarter, the team noted that "underlying demand has remained healthy through January" and there were some temporary disruptions resulting from winter storms. Wynn Interactive There wasn't much update on Wynn Interactive as management is winding down operations. The team is reviewing options in New York and Michigan and intends to provide an update in the future. Capital return Wynn repurchased $139.3 million worth of shares in the fourth quarter, at an average price $86.56 each. That's a nice increase versus the $56.2 million repurchased in the third quarter. (Jim Cramer's Charitable Trust is long 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 . 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The Wynn Resorts logo stands illuminated as people sit by the fountain at the Wynn resort in Macao, China.

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