Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Wynn Resorts (NASDAQ:WYNN) plunged as much as 17% Wednesday morning after a disappointing earnings report and a sharp dividend cut were announced Tuesday after market close.
So what: First-quarter revenue plunged 28% to $1.09 billion and the company swung from a profit of $226.9 million a year ago to a loss of $44.6 million, or $0.44 per share. Adjusted net income was $70.5 million, or $0.70 per share, but analysts were expecting earnings of $1.30 per share, so it was a big earnings miss.
The bigger news was a sharp drop in the quarterly dividend to $0.50 per share from $1.50 previously, which caught most investors off guard.
Now what: CEO Steve Wynn was unapologetic about the dividend cut, saying he would do everything to keep a strong balance sheet rather than paying a dividend with borrowed money. Consider that the company has over $5 billion in projects under construction, so now probably isn't the time to be over-paying a dividend.
Another problem for investors today is that Wynn didn't have much good to say about Macau or Las Vegas right now. He said a flat second quarter in Las Vegas would be a best-case scenario and didn't seem to think a recovery was imminent in Macau.
Add it all up and you have a lot of negative news for Wynn Resorts today. But long-term I think Steve Wynn is running the company in the right way and when Wynn Palace in Macau opens in early 2016 it should double the company's profitability. That's why I'm not giving up on this stock and would see the recent dip as a buying opportunity for investors willing to hold for multiple years.