Casinos & Hotels

Will Wynn Investors Dislike Earnings or the Dividend Cut More?

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Wynn Resorts Ltd. (NASDAQ: WYNN) reported its first-quarter earnings after the markets closed Tuesday. The company had $0.70 in earnings per share (EPS) on $1.09 billion in revenue compared to Thomson Reuters consensus estimates of $1.33 in EPS on $1.17 billion in revenue. The first quarter from last year had $2.32 in EPS on $1.51 billion in revenue.

The company did not give guidance looking ahead but there are consensus estimates of $1.48 in EPS on $1.22 billion in revenue for the third quarter.

Wynn Resorts also announced today that the company has approved a cash dividend of $0.50 per common share, a reduction from its previous quarterly dividend of $1.50.

24/7 Wall St previously pointed out back in early April that Wynn’s dividend was at-risk of being cut.

Wynn showed lower net revenues at the corporate level in 2014 at $5.433 billion, versus the $5.62 billion in 2013. Macau gambling revenue has been pressured for months now. Is it possible that Wynn simply did not know how strong those headwinds would get? Probably.

The casino and hotel operator had a dividend payout of $6.00 on an annualized basis. The problem is not the $7.58 in EPS in 2014, but rather the $6.06 per share expected in 2015. It sounds good that the consensus earnings estimates are $7.50 per share in 2016, but that is assuming the trend of the 7.8% revenue drop expected in 2015 is followed with 24% expected revenue gains in 2016.

The casino reported its segments as:

  • In the first quarter of 2015, Macau’s net revenues were $705.4 million, a 37.7% decrease from the $1,132.7 million generated in the same period last year.
  • Las Vegas net revenues were $386.9 million, a 1.6% increase from $380.9 million in the first quarter of last year.

Total cash and investment securities balance at the end of March was $2.1 billion and at the same time total debt outstanding at the end of the quarter was $8.0 billion.

Shares of Wynn closed Tuesday up 1.3% at $130.48. In after-hours trading, shares were down 11% at $116.25. The stock has a consensus analyst price target of $152.24 and a 52-week trading range of $121.53 to $222.33.

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