Wynn shares finish slightly lower as analysts adjust expectations

Shares of Wynn Resorts Ltd. closed slightly lower on Wednesday as analysts adjusted their expectations for the third quarter and the rest of 2012 after the gaming company fell short of earnings projections for the second straight quarter.

The Las Vegas-based company posted second quarter net income of $138.1 million, or $1.37 a share, for the second quarter on revenue of $1.25 billion. Analysts expected earnings of $1.54 a share on revenue of $1.36 billion.

The revenue decline reflects slowing growth in Macau, the world's largest gambling hub, and is a reversal from Wynn Resorts' first quarter when tourists to Macau boosted sales. Analysts also warned that Macau is becoming increasingly more competitive.

Macau revenues were down 11.6 percent in the second quarter, Wynn said Tuesday.

Las Vegas numbers were off 7.1 percent because of an extremely low baccarat hold, according to a report by Union Gaming Research analysts Bill Lerner and Grant Govertsen.

"Wynn's Las Vegas operations held 15 percent, which is 750 basis points lower than the midpoint of its normalized range," the report said. "Notably, in April the property lost money in baccarat for the month."

Union Gaming estimated the "low hold negatively impacted (earnings) by roughly $30 million to $35 million." The research firm lowered its third quarter earnings estimate to $348 million from $393 million and its estimate for 2012 is down to $1.43 billion from $1.54 billion.

"We continue to believe that Wynn is a best-in-class operator, has a great balance sheet, and Cotai will present an avenue for growth down the road," Union Gaming said.

Deutsche Bank analyst Richard Ramsden lowered his target price on Wynn Resorts to $118 from $144. David Bain, an analyst with Sterne Agee, kept a price target of $114.

Wynn Resorts shares lost $1.07, or 1.1 percent, to close at $96.29 on heavy volume of 5.2 million shares traded on the Nasdaq.

The company's average daily trading volume for the past three months is 2.4 million shares. The modest decline suggests investors were relieved Macau results weren't worse.

Robert LaFleur, an analyst with Cantor Fitzgerald, cautioned that risks remain for Wynn Resorts, including a global or regional economic slowdown and potential competition for a developing market.

LaFleur said Wynn's dispute with co-founder Kazuo Okada presents a risk depending on the outcome of multiple lawsuits and countersuits.

Wynn Resorts shares have traded in a 52-week range between $95.10 and $166.90.

"We continue to find the valuation appealing, but recognize a lack of catalysts, and more importantly, a murky China/Macau environment, makes new money investments difficult at current levels," Ramsden said.

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