What Happened to Wynn Resorts?

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Casino and gaming giant Wynn Resorts (NAS: WYNN) recently posted an unlucky third quarter as earnings failed to meet market expectations. The struggling home casino market in Las Vegas took off some shine from the business boom in thriving Macau.

Let's take a closer look.

Quick numbers
Revenue rose to $1.3 billion, a 30% year-over-year increase. Although the company posted net income of $127 million compared with a loss of $33.5 million last year, its adjusted earnings per share of $1.05 fell short of the market expectation of $1.18.

Wynn owns two casino-based resorts in Las Vegas that account for nearly 30% of its revenues. But post-recession, the Las Vegas gaming industry has suffered, and Wynn's Vegas revenue saw a steep 8.3% decline this quarter. But the biggest reason for the plunge was the fall in company's win ratio in Vegas, to 18.3% from 22.8% last year.

High occupancy rates and increased prices for rooms helped the company earn better revenues in other business segments. However, this business can't match the volume of money generated by the casino segment.

Macau magic
Wynn Macau's 42% revenue growth in this quarter is no surprise to me, as Macau has been on a tear lately. The company derives nearly 70% of its revenue from this hot gaming market.

The VIP segment of the casinos had much to do with the steep growth, contributing 45% higher revenue over last year, while the mass-market segment was up by 16%.

It also bears noting that the Macau government recently announced that it will keep the gambling-table cap fixed at 5,500 until 2013. The combined table count in Macau, including those of casino operators Las Vegas Sands (NYS: LVS) , Melco Crown Entertainment (NAS: MPEL) , and MGM Resorts (NYS: MGM) , is already up to 5,379 tables, so there isn't much room for table growth in the next two years.

The Foolish bottom line
Wynn Resorts has done well with its growth over the past two years. The poor quarterly performance resulting from weakness in Las Vegas is, however, a concern. I'm staying cautious and waiting for better numbers. To find out when that happens, make sure to add Wynn to our personalized watchlist service, My Watchlist. It's free, and it helps you constantly stay updated on news and analysis on your favorite companies.

At the time this article was published Fool contributor Navjot Kaur owns no shares in any of the companies mentioned in this article. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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