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Luxury hotels and casino operator Wynn Resorts (NASDAQ:WYNN) missed analysts' expectations in Q2 CY2024, with revenue up 8.6% year on year to $1.73 billion. It made a non-GAAP profit of $1.12 per share, improving from its profit of $0.91 per share in the same quarter last year.
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Wynn Resorts (WYNN) Q2 CY2024 Highlights:
- Revenue: $1.73 billion vs analyst estimates of $1.74 billion (small miss)
- Adj EBITDA: $571.7 million vs analyst estimates of $579.8 billion (1.4% miss)
- EPS (non-GAAP): $1.12 vs analyst expectations of $1.19 (6.1% miss)
- Gross Margin (GAAP): 43.5%, down from 67.7% in the same quarter last year
- Adjusted EBITDA Margin: 25.7%, down from 27.4% in the same quarter last year
- Market Capitalization: $8.17 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.
Casino OperatorCasino operators enjoy limited competition because gambling is a highly regulated industry. These companies can also enjoy healthy margins and profits. Have you ever heard the phrase ‘the house always wins’? Regulation cuts both ways, however, and casinos may face stroke-of-the-pen risk that suddenly limits what they can or can't do and 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 these players to adapt to changing consumer preferences, such as being able to wager anywhere on demand.
Sales GrowthA company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Unfortunately, Wynn Resorts's 1.2% annualized revenue growth over the last five years was weak. This shows it failed to expand in any major way and is a rough starting point for our analysis.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Wynn Resorts's annualized revenue growth of 34.8% over the last two years is above its five-year trend, suggesting its demand recently accelerated. Note that COVID hurt Wynn Resorts's business in 2020 and part of 2021, and it bounced back in a big way thereafter.
We can dig further into the company's revenue dynamics by analyzing its three most important segments: Casino, Hotel, and Dining and Entertainment, which are 58.2%, 17.6%, and 16.2% of revenue. Over the last two years, Wynn Resorts's revenues in all three segments increased. Its Casino revenue (Poker, slots) averaged year-on-year growth of 67.9% while its Hotel (overnight bookings) and Dining and Entertainment (food, beverage, Wynn Interactive) revenues averaged 31.3% and 9.9%.
This quarter, Wynn Resorts's revenue grew 8.6% year on year to $1.73 billion, missing Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 3.5% over the next 12 months, a deceleration from this quarter.
Operating MarginOperating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. It's also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Wynn Resorts's operating margin has risen over the last year and averaged 12.6%. Its profitability was higher than the broader consumer discretionary sector, showing it did a decent job managing its expenses.
In Q2, Wynn Resorts generated an operating profit margin of 15.6%, in line with the same quarter last year. This indicates the company's overall cost structure has been relatively stable.
Key Takeaways from Wynn Resorts's Q2 Results We struggled to find many strong positives in these results. Its adjusted EBITDA and EPS both missed and its Hotel segment revenue fell short of Wall Street's estimates. Overall, this quarter could have been better. Despite this, the stock traded up 2.8% to $78.40 immediately following the results.
