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Overview of Wynn Resorts’ 3Q15 Earnings

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Snapshot

Wynn Resorts reported another disappointing third quarter earnings on 15th October 2015. The company’s earnings and revenues both fell on a year-over-year, or YoY, basis for the quarter. The revenues for the third quarter fell by about 27% YoY, to $996.3 million, while profits fell even more. The operating income for the quarter fell by 54% YoY, and its net income fell by about 61.5% YoY. The third quarter operating margin fell to 27.8% from 28.1%.

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Macao Market

As seen in the previous article, the prime reason behind the weakness seen across the gaming sector is the slump in Macao’s spending. More details include:

  • The region has seen revenues fall continually for the past one year.
  • In 3Q15, Wynn Resorts’ Macao operations saw net revenues fall by 37.9% year-over-year to $585.1 million and EBITDA[1. earnings before interest, taxes, depreciation, and amortization] fell by 50% to $162.8 million during the same time frame.
  • The VIP segment’s turnover fell by a 51% to $12.2 billion, from $25 billion in 3Q15. Mass market revenues too seem to offer no respite, with revenue falling by 13.7% to $1,197 million.
  • Non-Casino revenue in the Macao region fell by ~22% to $77 million. The Revenue per available room, or RevPAR, fell by 5.6% in the third quarter, primarily driven by a 260 basis points fall in occupancy rate and a 3.1% fall in average daily rate, or ADR, for the same time frame.

Las Vegas market

The Las Vegas market operations also saw weakness with net revenues falling by 3.9% YoY to $ 411 million. More details include:

  • Casino revenues fell by 14.8% YoY to $152 million.
  • Non-casino revenue was Wynn Resorts’ only segment that saw minimal growth in 3Q15. Non-casino revenues rose by 1.9%, to $303.6 million.
  • The table games win stood at 23.7%, within the expected range of 21%–24% and below last year’s 25.7%.
  • The food and beverage revenue grew by 4.5% year-over-year and the RevPAR also grew by 2.1% year-over-year for the market. The growth in RevPAR is attributable to a 3% growth in ADR while the occupancy rates fell from 89.3% to 88.3%.

Next, we’ll look at whether a turnaround is in sight for Wynn Resorts’ majority market, Macao. Macao’s six biggest casino operators include Sands China (LVS), Galaxy Entertainment, Melco Crown Entertainment (MPEL), MGM Resorts (MGM), and Wynn Macau (WYNN). One way to gain access to these companies is to invest in funds like the VanEck Vectors Gaming ETF (BJK). For a broader exposure, investors can invest in the Consumer Staples Select Sector SPDR Fund (XLP). The fund has ~25% exposure to these companies.

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