Wynn Resorts Ltd. (WYNN) reported second quarter 2011 adjusted earnings of $1.60 per share. The quarter’s earnings trounced the Zacks Consensus Estimate of 99 cents and improved considerably from 52 cents earned in the prior-year quarter. On a GAAP basis, earnings per share were 97 cents versus 42 cents recorded in the comparable quarter last year.
Net revenue climbed 32.4% year over year to $1,367.4 million. The outperformance was primarily attributable to the business boom in Macau and improved performance at Las Vegas.
Macau Operations
Net revenue at Wynn Macau was $976.5 million, up 36.7% year over year, primarily driven by a significant increase in the table games turnover in the VIP segment, which rose 50.6% from the prior-year period to $32.7 billion.
The VIP table games win in the quarter was 2.89% based on turnover, in line with the expected range of 2.7% to 3.0% but lower than 3.22% recorded in the prior-year quarter.
Table games in the mass market category expanded 25.9% year over year to $690.3 million. The mass market table games win rate was 27.8%, in line with the expected range of 26% to 28% and above 22.9% recorded in the year-earlier quarter.
Average daily rate (ADR) at Wynn Macau was $314, up from $287 in the year-ago quarter. The quarterly results include the full contribution from Encore, which added 414 rooms and villas. The property’s occupancy level also leaped to 90.5% from 81.3% in the prior-year quarter.
Non-gaming revenues at Wynn Macau increased 33.6% to $94.6 million from the prior-year quarter aided by solid performance from all non-casino segments. Including Encore, Wynn Resorts currently boasts 493 tables (265 VIP tables, 217 mass market tables and 11 poker tables) and 1,053 slot machines in Macau.
Las Vegas Operations
Wynn Resorts’ revenue from Las Vegas operations increased 22.8% year over year to $390.8 million. Net casino revenue was $158.3 million, up 35.1% from the prior-year period. Gross non-casino revenue grew 12.9% year over year to $275.6 million, buoyed by improved revenues from all non-gaming segments.
With the global economy recovering gradually, Wynn reported an upside in room revenues, which jumped 15.5% year over year to $91.1 million. ADR also rose 22.1% to $240, but occupancy fell 3.4 percentage points to 89.2% due to 1.7% fewer rooms available for sale due to renovation. The room remodeling program was completed in May 2011.
Balance Sheet
Exiting the quarter, Wynn Resorts’ total cash balance was $1.7 billion. Total debt outstanding was $3.1 billion, including obligations of approximately $2.6 billion for Wynn Las Vegas and $551 million for Wynn Macau.
Our Take
We remain optimistic on the company based on its improving fundamentals both in Macau and Las Vegas. The Las Vegas business, which was worst during the downturn, is rebounding with higher room rates and conventional bookings. Wynn Macau’s contribution to the company’s earnings has been significant over the last few years. Hence, following a solid second quarter, we expect estimates to go up in the coming days.
However, the company’s operating environment is extremely competitive. At present, the company has only Cotai Project in its pipeline. Wynn Resorts will face stiff competition from its peer Las Vegas Sands Corporation (LVS), which will release its second quarter 2011 earnings on July 26.
Wynn Resorts currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. However, we maintain our long-term Neutral recommendation on the stock.


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