Wynn Resorts (WYNN) is scheduled to report the third quarter results on Tuesday, October 27, 2009. This will be a key barometer for casinos like Las Vegas Sands (LVS), MGM, and more. In the last quarter, the company's actual earnings exceeded the market's consensus significantly. The company is more likely to continue its positive earnings streak in Q3-2009 as well.
Analysts' estimates for the quarter ending September 2009 (Q3) range from a low of $-0.13 to a high of $0.32, with a consensus of $0.14. For the fiscal quarter ending September 2009, the consensus EPS forecast has remained the same over the past week at $0.14 and increased over the past three months from $-0.04 to $0.14.
In the last two years, Q3 revenue trended down over Q2 revenues. However, this time I guess the trend is likely to break. This is more due to sector wide optimistic revenue performance rather than the result of the company doing some thing extraordinary.
On a sequential quarter basis the company may report higher revenues but it is more likely to report lower EPS on a sequential quarter basis.
Recently, the company completed Hong Kong initial public offering (IPO) for its Macau unit. Through the Hong Kong IPO, Wynn sold 1.25 billion shares or a 25% stake in its Macau business for around $1.5 billion. After raising money through IPO, WYNN raised another $0.5 billion through note sale – this makes me feel bit nervous about the company's liquidity and debt levels. Of course, the company aid that the proceeds would be use to repay some debt. Still, I have a nagging feeling about this stock.
The company is currently trying to improve its income statement mostly by limiting costs. With regards to Encore, in Macau, it is on schedule. It's on budget. It's being built out of revenue. The facility will open up this spring with 10 rooms a floor and completely integrated 415, all-suite and villa hotel with its own spa, casinos and other things right smack in the middle of Macau, across from the front door of the Arc de Triomphe Hotel and MGM.
The company's stock closed Friday at $62.46, compared to the 52 week range of $14.5 and $74.9. Technical indicators for the stock are Bearish. For a hedged play on this stock, look at a Jan '10 65 covered call (UWY AM) for a net debit in the $56.86 area. That is also the break even stock price for this trade. This covered call has 82 day duration, provides 8.45% downside protection and a 13.8% assigned return rate for a 58.75% annualized return rate.
