Earnings estimates continue to fall for Wynn Resorts (WYNN – Analyst Report) after the company reported disappointing first quarter results on April 28. The drop in consensus has been significant enough to send the stock to a Zacks Rank #5 (Strong Sell), putting it in the bottom 5% of all companies we rank based on earnings momentum.
And while shares of Wynn Resort have sold off heavily, the stock still doesn’t look like a value at 23x forward earnings. It sports a Zacks Value Style Score of ‘D’.
Wynn Resorts owns and operates a casino hotel resort property in Las Vegas and owns 72.2% of Wynn Macau, which operates a casino hotel resort property in the Macau Special Administrative Region of the People’s Republic of China.
Since I last wrote about Wynn Resorts as the ‘Bear of the Day’ on February 11, 2015, shares have dropped more than 28%.
First Quarter Results
Wynn reported its first quarter results on April 28. Adjusted earnings per share came in at $0.70, well below the consensus of $1.36. It was also down from adjusted EPS of $2.32 in the same quarter last year.
Net revenues plunged 28% year-over-year to $1,092.2 million, which was also below the consensus of $1,203 million. This was driven by a 38% decline in its Macau Operations, partially offset by a 2% increase in its Las Vegas Operations.
The company also slashed its quarter dividend from $1.50 to $0.50. As I warned in February’s write up, the $1.50 quarterly dividend did not appear to be sustainable given Wynn’s high debt levels and the fact that it was paying out considerably more in dividends than it was generating in free cash flow.
Following the Q1 miss, analysts unanimously revised their estimates lower for both 2015 and 2016. This sent Wynn Resort to a Zacks Rank #5 (Strong Sell).
The 2015 Zacks Consensus Estimate is now $4.23, down from $6.16 before the report. The 2016 consensus has fallen from $7.31 to $5.30 over the same period.
Although shares of WYNN are down more than 50% from its 52-week high, it doesn’t look like a value here. The stock trades at a lofty 23x 12-month forward estimates and sports an enterprise value to cash flow ratio of 21.
The Zacks Value Style Score for WYNN is a ‘D’.
The Bottom Line
With falling estimates and premium valuation, Wynn Resorts still doesn’t offer much to like.
Todd Bunton, CFA is a Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor and Surprise Trader services.