Wynn Resorts Ltd. :WYNN-US: Earnings Analysis: Q2, 2017 By the Numbers : August 7, 2017

Wynn Resorts Ltd. reports financial results for the quarter ended June 30, 2017.

We analyze the earnings along side the following peers of Wynn Resorts Ltd. – Las Vegas Sands Corp., MGM Resorts International, Penn National Gaming, Inc., Boyd Gaming Corporation, Melco Resorts and Entertainment Ltd Shs Sponsored American Deposit Receipt Repr 3 Shs, Monarch Casino & Resort, Inc. and Wynn Macau Ltd. Unsponsored ADR (LVS-US, MGM-US, PENN-US, BYD-US, MLCO-US, MCRI-US and WYNMY-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 1,529.26 million, Net Earnings of USD 74.92 million.
  • Gross margins narrowed from 30.88% to 27.65% compared to the same period last year, operating (EBITDA) margins now 25.15% from 21.48%.
  • Year-on-year change in operating cash flow of 52.79% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • One-time items weakened operating performance.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 1529.26 1475.68 1300.43 1109.82 1058.36
Revenue Growth (%YOY) 44.49 47.91 37.34 11.4 1.72
Earnings (mil) 74.92 100.82 113.8 -17.44 70.39
Earnings Growth (%YOY) 6.43 34.03 30.47 -123.64 24.67
Net Margin (%) 4.9 6.83 8.75 -1.57 6.65
EPS 0.73 0.99 1.12 -0.17 0.69
Return on Equity (%) 21.09 33.03 117.65 N/A 170.38
Return on Assets (%) 2.53 3.39 3.98 -0.65 2.65

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Market Share Versus Profits

Revenues History
Earnings History

WYNN-US‘s change in revenue this period compared to the same period last year of 44.49% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that WYNN-US is holding onto its market share. Also, for comparison purposes, revenues changed by 3.63% and earnings by -25.69% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s gross margins showed no year-on-year improvement. In spite of this, the company’s earnings rose, influenced primarily by the improvement in operating margins (EBITDA margins) from 21.48% to 25.15%. For comparison, gross margins were 28.09% and EBITDA margins were 26.41% in the last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

WYNN-US‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to 91.45 days from 131.44 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

WYNN-US‘s change in operating cash flow of 52.79% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The expansion in operating (EBIT) margins from 13.94% to 16.14% has also impacted the company’s earnings growth. However, one-time items have been a drag on the operating performance. As a result, the company’s pretax margins contracted from 8.18% to 7.15%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Wynn Resorts Ltd. is a holding company, which engages in the development, ownership, and operation of destination casino resorts. It operates through the following segments: Macau Operations, Las Vegas Operations, and Corporate and Other. The Macau Operations segment is comprised of Wynn Macau and Wynn Palace. The Las Vegas Operations segment covers Wynn Las Vegas and Encore. The Corporate and Other segment is refers to the review of construction and development activities, and capital expenditures and assets for Wynn Boston Harbor development project. The company was founded by Stephen Alan Wynn, Elaine P. Wynn and Kazuo Okada in June 2002 and is headquartered in Las Vegas, NV.

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