MGM MGM Resorts International

Wynn Resorts Ltd. (WYNN) reported its first-quarter 2011 adjusted earnings of $1.38 per share, comprehensively beating the Zacks Consensus Estimate of 73 cents and the year-earlier earnings of 27 cents. On a GAAP basis, net income was $173.8 million or $1.39 per share versus $27.0 million or 22 cents per share recorded in the comparable quarter last year.

The results were boosted by higher-than-expected revenues. Net revenue climbed 38.7% year over year to $1,260.3 million outpacing the Zacks Consensus Estimate of $1,133.0 million. The outperformance was primarily attributable to its booming Macau operations and improved performance at Las Vegas.

Macau Operations

Net revenue at Wynn Macau was $865.7 million, up 46.6% year over year, primarily driven by a significant increase in table games turnover in the VIP segment, which rose 44.7% from the prior-year period to $29.3 billion.

The VIP table games win in the quarter was 2.69% based on turnover, but was slightly below the expected range of 2.7% to 3.0% and significantly higher than 2.70% recorded in the prior-year quarter.

However, table games in the mass market category expanded 29.2% year over year to $682.5 million. Mass market table games win rate was 27.9%, well above the expected range of 21% to 23% and 22.2% recorded in the year-earlier quarter.

Average daily rate (ADR) at Wynn Macau was $307, up from $282 in the year-ago quarter. However, occupancy level plummeted to 88.6% from 90.7% in the prior-year quarter.

Non-gaming revenues at Wynn Macau shot up 50.2% to $94.2 million from the prior-year quarter, primarily aided by higher hotel and retail revenues. These revenues leaped 79.1% and 37.7%, respectively, driven by the addition of Encore rooms and three new boutiques at Encore. Retail revenues benefited from strong same-store sales growth.

Including Encore, Wynn Resorts currently boasts 499 tables (263 VIP tables, 225 mass market tables and 11 poker tables) and 1,015 slot machines in Macau.

Las Vegas Operations

Wynn Resorts’ revenue from Las Vegas operations increased 24.0% year over year to $394.6 million. Net casino revenue was $194.2 million, up 39.2% from the prior-year period. Gross non-casino revenues grew 10.8% year over year to $249.0 million, driven by increased revenues from all non-gaming segments.

With the global economy recovering gradually, Wynn reported an upside in room revenues, which jumped 13.4% year over year to $88.0 million. ADR also rose 18.2%, but occupancy fell 1.7%, due to 2.3% fewer rooms available for sale during the quarter, due to the remodeling of the rooms at Wynn Las Vegas. This room remodeling is expected to be completed in the second quarter of 2011.

Balance Sheet

Exiting the quarter, Wynn Resorts’ total cash balances were $1.4 billion. Total debt outstanding was $3.2 billion, including approximately $2.6 billion of the Wynn Las Vegas debt and $551 million of the Wynn Macau debt.

During the quarter, company also doubled its quarterly dividend to 50 cents per share. The dividend will be payable on May 17, 2011 to shareholders of record as of May 3, 2011.       

Our Take

We remain optimistic on the company based on its improving fundamental growth prospects. Wynn Macau’s contribution to the company’s earnings has increased significantly in the last few years.

Moreover, business at Las Vegas is also rebounding with increased room rates and conventional bookings. Hence, based on the strong first quarter results and dividend hike, we expect estimates to go up in the coming days.

Wynn Resorts’ close competitor MGM Resorts International (MGM) will release its first-quarter 2011 earnings on May 2, 2011.

Wynn Resorts currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We are also maintaining our long-term Outperform recommendation on the stock.

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