Source: Wynn Resorts
After the company reported revenue and earnings for the first quarter of its 2014 fiscal year on May 1, shares of Wynn Resorts (WYNN 2.14%) skyrocketed 7% to close at $221.68. Now, with the casino giant's shares trading 82% above their 52-week low, should investors consider buying into Las Vegas Sands (LVS 1.06%) or Melco Crown Entertainment (MLCO 3.38%) instead, or is Wynn still an amazing long-term prospect?
Wynn handily outperformed the expectations!
For the quarter, Wynn reported revenue of $1.51 billion. This beat the $1.48 billion that analysts had anticipated and it was 9% higher than the $1.38 billion the company reported in the year-ago quarter. In its earnings release, the company chalked this increase in sales up to a 14% improvement in its Macau operations, where its revenue rose from $992.1 million to $1.13 billion.
Although Wynn's Macau operations performed well, there was some downside for the company. During the quarter, Wynn saw the revenue of its Las Vegas operations decline 1.5% from $386.6 million last year to $380.9 million this year. In general, forecasts call for casino revenue to fall in the U.S. so this shouldn't serve as a big surprise for investors, but a prolonged downturn could be somewhat problematic for the casino operator.
Source: Wynn Resorts
From a profitability perspective, Wynn did even better. For the quarter, management reported earnings per share of $2.22, which was significantly better than the $2.11 that Mr. Market wanted to see and 11% above the $2.00 that the company saw during the first quarter of 2013. According to the company's release, higher costs in its general, administrative, and casino expenses were offset by declines (in relation to sales) in its depreciation, amortization, and food and beverage expenses.
Can Wynn win against its competition?
Over the past five years, Wynn has done pretty well for itself. Between 2009 and 2013, the company grew its revenue an impressive 85% from $3 billion to $5.6 billion. According to the company's annual reports, this jump in sales stemmed from a modest rise in its Las Vegas operations but it was mostly attributable to a significant increase in its Macau business.
During this five-year period, Wynn's revenue from its Las Vegas operations rose 29% from $1.23 billion to $1.58 billion. While this is a nice growth rate, it's paltry when placed next to the company's Macau operations, which saw their revenue rise 122% from $1.82 billion to $4.04 billion. This rise in sales for the region resulted, in part, from the continued investments the company has made in growing its footprint there but it also stemmed from a rise in the casino industry in that region.
As impressive as Wynn's revenue growth has been, it's nowhere near the growth rate experienced by rivals like Las Vegas Sands and Melco Crown. Over the same five-year time-frame, Las Vegas Sands saw its revenue soar 202% from $4.56 billion to $13.77 billion. Just like Wynn, Las Vegas Sands has seen tremendous growth because of Macau. In fact, over the past year alone, the revenue the company derived from the region grew from 59.1% of sales (or $6.58 billion) to 65.3% (or $8.99 billion).
WYNN Revenue (Annual) data by YCharts
Although Las Vegas Sands has been a stronger growth story than Wynn, the fastest-growing casino operator with a great deal of exposure to Macau has been Melco Crown. Over the past five years, the company's revenue has shot up 282% from $1.33 billion in 2009 to $5.09 billion in 2013. Unlike the revenues of Las Vegas Sands and Wynn, all of Melco Crown's revenue comes from the region and this allows management to grow the company's sales at a much quicker pace than either of its major rivals.
However, recognizing that opportunities exist outside of Macau, Melco Crown's management team has been setting up its City of Dreams Manila resort in the Philippines, with an expected opening date this year. While the company will no longer be a regional pure play after this, it's likely that the move will protect its shareholders by diversifying its revenue base and permitting it to compete in less-competitive markets.
Foolish takeaway
Based on the data provided, it's not hard to tell why Mr. Market responded so positively to Wynn's performance. In addition to beating analysts' estimates on both the top and bottom lines, the company's long-term performance has been very impressive. Moving forward, it's likely that Wynn will continue its growth spurt if Macau keeps growing. However, for investors who are looking for faster-growing enterprises, Las Vegas Sands and Melco Crown seem to be very attractive alternatives.
