Wynn Resorts Ltd. :WYNN-US: Earnings Analysis: Q4, 2016 By the Numbers : March 13, 2017

Wynn Resorts Ltd. reports financial results for the quarter ended December 31, 2016.

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 Crown Entertainment Limited Sponsored ADR, Sands China Ltd. Unsponsored ADR, Century Casinos, Inc., Monarch Casino & Resort, Inc. and Caesars Acquisition Co. Class A (LVS-US, MGM-US, PENN-US, BYD-US, MPEL-US, SCHYY-US, CNTY-US, MCRI-US and CACQ-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 1,300.43 million, Net Earnings of USD 113.80 million.
  • Gross margins narrowed from 31.02% to 26.22% compared to the same period last year, operating (EBITDA) margins now 21.49% from 24.19%.
  • Year-on-year change in operating cash flow of 27.45% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth due to contribution of one-time items.

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

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 1300.43 1109.82 1058.36 997.68 946.9
Revenue Growth (%YOY) 37.34 11.4 1.72 -8.66 -16.79
Earnings (mil) 113.8 -17.44 70.39 75.22 87.22
Earnings Growth (%YOY) 30.47 -123.64 24.67 268.65 -20.23
Net Margin (%) 8.75 -1.57 6.65 7.54 9.21
EPS 1.12 -0.17 0.69 0.74 0.86
Return on Equity (%) 470.61 N/A 681.51 585.49 N/A
Return on Assets (%) 3.98 -0.65 2.65 2.84 3.4

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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 37.34% 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 17.17% and earnings by 752.64% 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 earnings rose year-on-year. But this growth has not come as a result of improvement in gross margins or any cost control activities in its operations. Gross margins went from 26.22% to 31.02% for the same period last year, while operating margins (EBITDA margins) went from 21.49% to 24.19% over the same time frame.

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 77.01 days from 126.39 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 27.45% 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 company’s operating (EBIT) margins contracted from 16.04% to 10.68%. In spite of this, the company’s earnings rose. This was influenced primarily by one-time items, which improved pretax margins from 9.36% to 10.27%.

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. engages in the development and management of casino resorts It operates through the Macau Operations and Las Vegas Operations segments. The Macau Operations segment manages Wynn Macau and Encore at Wynn Macau. The Las Vegas Operations segment covers Wynn Las Vegas and Encore at Wynn Las Vegas. It provides hotel rooms and suites; table games; slot machines; a race and sports book; and a poker room of casino gaming space, including a sky casino and private gaming salons; casual and fine dining in food and beverage outlets; spas and salons; lounges; and boutiques. The company was founded by Stephen Alan Wynn and Kazuo Okada in June 2002 and is headquartered in Las Vegas, NV.

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