Wynn Resorts announced a six-month delay in the opening of its UAE resort, coupled with a budget increase of $600 million attributed to ongoing conflicts in the Middle East. Despite these challenges, the company experienced a solid second quarter.
In its recently released earnings report, Wynn revealed group revenue of $1.86 billion for the quarter, marking a 7% year-over-year increase. Net income soared from $66.2 million last year to $140.1 million this year, while group-adjusted EBITDA saw a modest rise of approximately 3% year-over-year to reach $568.3 million.
Macau emerged as a key contributor to this success, particularly Wynn Palace in Cotai. The resort's revenue jumped by 21% year-on-year to $653.4 million, with adjusted EBITDAR climbing 28% to $201.5 million. Notably, the growth in these earnings stemmed from the mass market segment rather than the traditionally vital VIP sector, which saw declines in turnover and table games revenue of 32% and 29%, respectively. In contrast, mass market table game wins increased by 37%.
Earlier this year, Wynn introduced The Enclave, a new 432-suite hotel tower at Wynn Palace, expected to cost between $900 million and $950 million, addressing strong demand in the area. Wynn CEO Craig Billings confirmed that construction for The Enclave is set to begin before the year concludes. He also mentioned plans to start building an event center and theatre at Wynn Palace soon, with an anticipated opening in 2028 for the center and 2029 for The Enclave.
"We continue to stick to our knitting in Macau," Billings stated. "We’re very focused on one particular customer type, and that happens to be the customer type that is driving the market at the moment, and we continue to double down."
In Las Vegas, Wynn's total revenue remained steady at $643.2 million, although casino revenue rose by 6.5% to $158.1 million. The segment-adjusted EBITDAR saw an 8% drop year-over-year, totaling $215.2 million. Increased competition for high-rollers is evident, with rivals MGM and Caesars adopting different strategies. Caesars is preparing for a private takeover by Fertitta Entertainment, while MGM reported gains in the Las Vegas market.
"We believe the best way to earn and retain the highest value customers in Las Vegas is to continually raise the bar on what we offer them," said Wynn CFO Craig Fullalove.
Regarding speculation about a potential NBA franchise in Las Vegas, Billings noted that Wynn has owned a 38-acre plot on the Strip since 2017, which could support an arena project. Competitors Caesars and MGM are also vying for a franchise, with MGM partially owning the T-Mobile Arena. "We would love to see an NBA franchise in Las Vegas… We tend to get folks who are affiliated with the league and with opposing teams when they’re in town, and those are great customers for our business," he added.
Encore Boston Harbor reported a 3% year-over-year decrease in revenue, reaching $209.2 million, while adjusted EBITDAR declined 12% to $56 million, largely due to a drop in casino revenue. However, Billings pointed out that the venue achieved second-quarter records for both revenue per available room (revPAR) and hotel revenue, with overall demand in Boston remaining healthy.
A potential development involves the legalization of historical horse racing (HHR) in Massachusetts, which would allow patrons to wager on previously run horse races through anonymized games. This measure was included in an economic bill that advanced through the Massachusetts House in early July but is awaiting Senate approval. Suffolk Downs, located five miles from Encore Boston Harbor, stands to benefit significantly from this legislation.
Wynn finished the quarter with $1.5 billion in cash and cash equivalents against total debts of $10.7 billion. The company repurchased $75 million in shares, leaving about $326 million available under its repurchase authority. Shares closed at $101.15 on Wednesday, reflecting a 3% gain for the day; nonetheless, Wynn's stock has fallen about 17% since the beginning of the year.
Analyst Chad Beynon from Macquarie maintained an outperform rating for Wynn with a target price of $143. Beynon emphasized that the market may be undervaluing the resilience of earnings from Las Vegas and Macau and expressed optimism about the UAE properties despite the recent setbacks.
"We think Wynn should greatly benefit from forecasted Macau market growth, luxury assets in Las Vegas, the upcoming Al Marjan Island launch in the UAE, and its capital allocation strategy, which includes share repurchases," Beynon remarked.
