Wynn Resorts, Limited (WYNN) Stock Slumps Despite Upbeat Earnings

Wynn Resorts Stock Slumps Despite Upbeat Earnings
Wynn Resorts, stock tumbled in after-hours trade on Thursday even after the company reports better-than-expected earnings and revenue for the 2QFY16

On Thursday, Wynn Resorts, Limited (NASDAQ:WYNN) reported its stronger-than-expected financial results for the second quarter of fiscal 2016. Despite, stock plummeted more than 5% during after-market hours trading following the earnings release.

As per the results, the giant casino company’s top line and the bottom line figures were above Wall Street analysts’ expectations. The company reported total net revenue of $1.06 billion, an increase of 2% as opposed to $1.04 billion it had in the same quarter a year ago, as revenue from its Macau operations surged after seven straight quarterly declines. The reported revenue surpassed the analyst expected figure of $1.02 billion.

In its second quarter, the casino company reported a net income of $70.4 million or $0.69 per share, significantly up as compared to $56.5 million, or $0.56 per diluted share it had in same period last year. However, the reported EPS was more than analysts’ anticipation by $0.16, driven by unpredicted gains from its struggling Macau resort as opposed to prior quarter.

For the second quarter, Wynn has the adjusted property (Earnings before interest, Taxes and Amortization (EBITDA) of $312.7 million for the second quarter of 2016, an increase of 5.8% from $295.4 million in same quarter a year ago.

In a conference call on Thursday afternoon, Wynn Resorts CEO Steve Wynn notified that there was low profitability of table games at its casinos throughout the US. He further added that the company is bearing in mind incremental improvements in order to increase the “the odds for the house at various table games.”

However, the Wall Street analysts responded warmly to the Wynn Resorts near-term outlook after Mr. Wynn notified that Chinese regulators will restrict

Nevertheless, Wall Street analysts responded tepidly to the Resort's near-term outlook after CEO Steve Wynn suggested that Chinese regulatory authorities will limit the company to 100 tables at its new Wynn Palace resort that is scheduled to open in Cotai on August 22. Initially, Wynn Resorts projected that Chinese authorities would approve a range of 150-200 tables. The limits could force the casino to move a handful of tables from Macau over to the new resort.

Macau is the world’s largest gambling market and holds special importance for Wynn as more than half of its revenue is generated from its Macau division. In recent years, the company is facing challenges in the region due to corruption crackdown in China due to which there has been decline in its earnings.

Since almost a year now, Chinese government has been cracking down on gambling in Macau. Government initiatives like monitoring of debit card in the region, placing camera’s in VIP rooms, limiting the number of tables allotted to new projects and launching anti-corruption drives. Apart from all these factors, one major reason for disappointing earnings was slowdown of Chinese economy.

In Macau, Wynn revenue surged 3.6% to $639.3 million from last year figure of $617 million. Wynn’s Macau witnessed 23.8% decline in its VIP Table gaming turnover to $11.84 billion during the period as opposed to $15.54 billion a year ago. Wynn’s revenue per room available increased 5.5% to 5.2% to $294 in Macau during the quarter. In the second quarter, total non-casino revenues in Macau dropped 12.7% to $68.1 million from $78.1 million in the same period of 2015.

According to the company, revenues from its Las Vegas operations plummeted 1.1% to $419 million from $423.5 million it had for the same period a year back. Table games revenue came at $427.4 million, reflecting a decline of 16.1% from $509.3 million in the 2015 quarter. Wynn’s average room revenue rose 3.1% to $263 during the quarter. Notably, its non-casino revenues from Las Vegas operations fell nearly 0.6% to $327.4 million from last year’s figure of $330.3 million.

The casino giant also announced the cash dividend of $0.50 a share, which will be payable on August 23, 2016 to stockholders of record as of August 11, 2016.

According to the press release, Wynn’s $4 billion Palace Casino Resort in Macau is all set to open on August 22, after witnessing delays for two times.

Shares of Wynn Resorts fell 6.8% to $97.50 during after-hours trading session. Year-to-date, the stock is up more than 52%.

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