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Luxury hotels and casino operator Wynn Resorts (NASDAQ:WYNN) reported results ahead of analysts' expectations in Q4 FY2023, with revenue up 83.1% year on year to $1.84 billion. It made a non-GAAP profit of $1.91 per share, improving from its loss of $1.23 per share in the same quarter last year.
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Wynn Resorts (WYNN) Q4 FY2023 Highlights:
- Revenue: $1.84 billion vs analyst estimates of $1.74 billion (5.9% beat)
- EPS (non-GAAP): $1.91 vs analyst estimates of $1.16 (64.9% beat)
- Gross Margin (GAAP): 44.4%, down from 50.4% in the same quarter last year
- Market Capitalization: $11.22 billion
Founded by the former Mirage Resorts CEO, Wynn Resorts (NASDAQ:WYNN) is a global developer and operator of high-end hotels and casinos, known for its luxurious properties and premium guest services.
Casinos and GamingCasino and gaming companies that offer slot machines, Texas Hold ‘Em, Blackjack and the like can enjoy limited competition because gambling is a highly regulated industry. These companies can also enjoy healthy margins and profits because have you ever heard the phrase ‘the house always wins’? On the other hand, regulation cuts both ways and casino and gaming companies may face stroke-of-the-pen risk that suddenly limits what they do or where they can do it. Furthermore, digitization is changing the game, pun intended. Whether it’s online poker or sports betting on your smartphone, innovation is forcing casino and gaming companies to innovate and adapt to keep up with changing consumer preferences such as being able to wager anywhere on-demand.
Sales GrowthReviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Wynn Resorts's revenue was flat over the last 5 years. Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. Wynn Resorts's annualized revenue growth of 31.7% over the last 2 years is above its 5-year trend, suggesting there are some bright spots.
We can understand the company's revenue dynamics even better by analyzing its most important segments, Casino and Non-Gaming, which are 57.9% and 18.9% of revenue. Over the last 2 years, Wynn Resorts's Casino revenue (Poker, slots) averaged 55.2% year-on-year growth while its Non-Gaming revenue (hotel, dining) averaged 28.1% growth.
This quarter, Wynn Resorts reported magnificent year-on-year revenue growth of 83.1%, and its $1.84 billion of revenue beat Wall Street's estimates by 5.9%. Looking ahead, Wall Street expects sales to grow 4.7% over the next 12 months, a deceleration from this quarter.
Operating MarginOperating margin is an important measure of profitability. It’s the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. Operating margin is also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Wynn Resorts was profitable over the last two years but held back by its large expense base. Its average operating margin of 4.9% has been paltry for a consumer discretionary business. This quarter, Wynn Resorts generated an operating profit margin of 19.4%, up 9.6 percentage points year on year. This increase indicates the company was more efficient with its expenses over the last quarter, spending less money in areas like corporate overhead and advertising.
Over the next 12 months, Wall Street expects Wynn Resorts to become more profitable. Analysts are expecting the company’s LTM operating margin of 12.9% to rise to 16.5%.Key Takeaways from Wynn Resorts's Q4 Results We were impressed by how Wynn Resorts blew past analysts' EPS expectations this quarter. However, we note its earnings received a one-time boost from an income tax benefit related to the valuation allowance on certain deferred tax assets. Nevertheless, we were also excited its revenue outperformed Wall Street's estimates, driven by strong customer spending in Macau and Las Vegas. Zooming out, we think this was a great quarter that shareholders will appreciate. The stock is up 4.1% after reporting and currently trades at $103.9 per share.