Red Rock Resorts, the parent company of Station Casinos, on Tuesday said fourth-quarter net income rose from a year ago, topping analysts’ forecasts. A one-time revaluing of company tax liability related to the recent federal tax reform buoyed results.
In a statement, the company, which operates 16 casinos in the Las Vegas Valley and has stakes in three others, said the company’s first-quarter net income rose 11.9 percent, to $46 million, or 35 cents per diluted share, for the three months ended Dec. 31, up from net income of $41.1 million, or 37 cents per diluted share, a year earlier.
The results topped the average 27-cents-per-share forecast of eight analysts polled by Yahoo Finance.
Revenue fell 0.2 percent to $394 million from $394.6 million, partly because of construction delays in the renovations of its Palms and Palace Station properties. But company officials remained bullish on the future, given Las Vegas’ growing economy and population.
On the company’s quarterly results conference call, Chief Financial Officer Steven Cootey said jobs, wages and new-home and existing-home sales are rising in Nevada. Furthermore, he added, more than $14 billion in development projects are underway in Las Vegas, led by the $1.9 billion domed-stadium for the National Football League’s Raiders, the Las Vegas Convention Center expansion and multiple Strip developments.
“Multiple experts believe, that the recent tax reform will incentive movement of both new residents and businesses alike to zero-tax states such as Nevada,” he said. “These strong economic fundamentals bode well for our best-in-class assets, market-leading distribution and scale, favorable supply-demand dynamics and a deep development pipeline.”
Red Rock Resorts’ fourth-quarter net revenue from Las Vegas operations rose 0.3 percent from a year earlier to $364.7 million from $363.6 million. Fourth-quarter revenue from Native American operations fell 2.2 percent from a year earlier to $24.5 million from $25.1 million, driven down by lower development fees.
Red Rock Resorts reported progress on the makeovers of both the Palms, acquired for $312.5 million in 2016, and Palace Station.
The company said the $191 million Palace Station project is on schedule, on budget and set to finish by year-end 2018. The company added that it will accelerate the third phase of its redevelopment plan for the Palms. Upgrades will expand the property’s casino floor with 300 new slot machines and 16 table games; add a Hong Kong-style dim sum restaurant; and a casino connector to integrate the adjacent 599 room Palms Place and the self-parking garage into the property.
Red Rock said it expects the first phase of the renovated Palms to open in this year’s second quarter. Second-phase renovation elements, the company said, are set to open in the first and second quarters of 2019; third-phase elements are to open in 2019’s fourth quarter.
For the full year, Red Rock Resorts earnings were $63 million, or 42 cents per share, down from earnings of $155.8 million, or $1.03 cents per share, a year earlier. Company officials said delays in the renovations of its Palms and Palace Station properties hurt results.
Full-year revenue rose 0.7 percent to $1.6 billion from $1.5 billion.
Gaming analysts said Red Rock Resorts is a long-term investment.
Union Gaming analyst John Decree said he remained favorable on the Las Vegas locals market.
“However, we are sticking with our Hold rating on the shares of Red Rock Resorts as we believe the market is adequately pricing in the long-term upside at the Palms,” Decree said.
Macquarie Securities analyst Chad Beynon said Red Rock investors “will need to wait until 2019, and potentially 2020,” until the company’s true cash flow potential is realized.
Although it wasn’t addressed in the conference call, CBS Sports’ Jason La Canfora reported this month that Red Rock Resorts’ Chairman and CEO Frank Fertitta III, and Director Lorenzo Fertitta were rumored to be interested in buying the NFL’s Carolina Panthers and would have to divest of their holdings in the casino company to do so.
But Tuesday, ESPN reported that the Fertittas, who owned 80 percent of the Ultimate Fighting Championship before it was sold for $4 billion in July 2016, had removed themselves from the running.
Red Rock Resorts shares fell $1.03, or 2.98 percent, Tuesday to close at $33.51 on the Nasdaq.
