Ahead of the release of Wynn Resorts’s second-quarter earnings, Deutsche Bank is trimming its forecasts for Wynn Macau, while raising its estimates for its Las Vegas properties.
In the U.S., Deutsche Bank analyst Carlo Santarelli expects Wynn Las Vegas to report another solid quarter, despite a challenging comparison.
“We believe the third quarter has gotten off to a very strong start, with continued high-end strength in early July around the holiday,” Santarelli said.
In Macau, while market gross gaming revenue outperformed their forecast for the second quarter, Santarelli believes there’s a modest share loss at Wynn Macau largely attributed to Galaxy Macau since the Andaz and Raffles Tower openings. In addition, a promotional push from the operator weighed on results.
“Accordingly, we have raised our Wynn Las Vegas second-quarter adjusted EBITDAR estimates, as well as our 2024/2025 forecasts, while trimming our Macau forecast for the second quarter, 2024, and 2025.”
Deutsche Bank is reaffirming its rating, with its estimated revisions extracting $1 from its price target, which goes to $131 from $132, and “continues to offer meaningful upside,” Santarelli said.
Deutsche Bank has upwardly revised its Las Vegas property-level forecast to account for continued strength at the high end related to both average daily room rates and its performance in table games, specifically baccarat.
Deutsche Bank’s updated property EBITDA forecast of $221 million compares to its prior forecast of $214 million and consensus of $213 million. In addition, it has increased its 2024 Las Vegas property EBITDA estimate, given the second-quarter revision.
Santarelli believes there’s continued strength into July and a solid book of group through year end.
“Our second-half-2024 property EBITDA forecasts, while revised higher, remain down year over year, given the challenging comparisons from several perspectives, though most notably in the high-end-gaming segment (baccarat),” Santarelli said.
Deutsche Bank is projecting third quarter EBITDA will decline 8%, while fourth quarter will drop 10% over 2023.
After an April in which gaming volumes and revenue per room were up year over year despite difficult comparisons, Deutsche Bank believes May and June for Wynn Las Vegas “have been broadly solid.” Through May, Strip gross gaming revenue is up 5%, though most notably for Wynn, baccarat revenue is up about 15%, while Strip revenue per room is up about 9%, with the high end driving the bulk of the growth, Santarelli said.
“We believe July has gotten off to a strong start, with our checks indicating robust high-end demand over the Fourth of July weekend,” Santarelli said. “While the third quarter is seasonally slow for groups, thereby abbreviating booking windows, we feel current consensus forecasts are broadly reasonable. Given the solid start to the period, we would not expect meaningful revisions coming out of the second-quarter report.”
Santarelli expects Wynn management to again “resonate favorably” in its earnings call, with the group outlook for 2024 and 2025 remaining at record levels. That provides a healthy backdrop when coupled with a greater casino mix for average daily room rate compression on leisure guests, he added.
“Much like the first quarter, we expect non-gaming comps to again easily surpass net gaming revenue comparisons, though we do believe net casino revenue will be considerably better in the second quarter than it was in the first from a year-over-year perspective,” Santarelli said.
As for Macau, Deutsche Bank has trimmed its property-level forecasts to account for what it anticipates will be lower than previously forecast market share in the period. The firm expects Wynn Macau market share for the second quarter to be 13%-13.5%, down from 14% in the first quarter and in line with the year-over-year period.
The updated property EBITDA forecast of $295 million compares to its prior forecast of $310 million and consensus of $316 million.
The second-quarter property EBITDA forecast of $295 million is down about 8% from the first-quarter hold adjusted result. Deutsche Bank cites a $110 million sequential market gaming revenue contraction, in addition to market-share slippage and higher non-gaming taxes related to operating expenses.
“Recall that management noted that mass drop in Macau was up 30% in April relative to April of 2019, with hotel occupancy in the period at 99%,” Santarelli said. “Management also noted that the Golden Week mass drop was also up 30% versus the comparable period in 2019. We believe the mass-drop trends held reasonably firm over the balance of the second quarter.”
As part of their concession proposal, Wynn committed to invest $2.2 billion over 10 years in a mix of capital and operations expenditures. Wynn expects to spend $350 million to $500 million over 2024 and 2025 related to the concession requirement, Santarelli said.
