Earnings Miss Aside, Wynn Looks Like a Long-Term Winner

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One of the gambling industry's top players, Wynn Resorts , delivered an earnings report on Monday that fell short of analyst expectations on the back of weaker-than-expected numbers from the Chinese gambling mecca of Macau. Company namesake CEO Steve Wynn noted that the company lost some of the market in Macau as its flagship resort there is enduring substantial renovations -- taking out one-sixth of its available rooms. But what may be surprising (and potentially encouraging) to investors is the unexpected strength on our own shores, with the company's Vegas results looking quite appealing. Is Wynn a long-term buy on the "limp-wristed" U.S. economic recovery?

Revenue jumps, missesWith one-time items out of the way, Wynn brought in $1.33 billion in revenue for the quarter, yielding $1.51 per share on the bottom line. The sales figure represents a 6.3% jump over the prior year but fell short of last year's net, because the company retired debt early. Analysts were expecting $1.34 billion in revenue with $1.55 on the bottom line.

The miss was a result of two relatively novel events for the company in recent times -- softness in Macau and strength in Vegas. The company's two main properties on the Strip, the Wynn and Encore, experienced revenue gains of 16.2%. It wasn't quite a bullish bet on the economic recovery, as mentioned by CEO Wynn himself, but instead on the prospect of having wealthier foreigners come to Vegas to experience the premium niche the company has carved out for itself -- mainly in Macau.

Long term, barring another major economic meltdown, Wynn looks to be an attractive play on the emerging Chinese middle class, the ongoing U.S. recovery, and most importantly, the top-notch leadership within the company.

Forward motion
The Macau business will correct as the renovations come to a close. Perhaps even more so than in the United States, Wynn's resort in Macau is a class-leading business known for its premium quality. The company is currently building its second property in the region, set to open sometime in 2016. As Wynn regains and then resumes its forward progress into the Macau market, investors will watch sales continue their previously high rate of growth, as opposed to last quarter's 2.6% sales increase.

Back at home, the company will benefit from the aforementioned international interest in Vegas, along with the slowly but surely recovering American consumer.

At just under 18.7 times forward earnings, Wynn is not cheap by any means, but its growth is likely to sustain for the foreseeable future, warranting the upfront premium. Investors could look at Las Vegas Sands, trading at under 17 times forward earnings, or perhaps MGM Resorts, but my bet is with Wynn, the man. Steve Wynn has been a leading force in the gambling industry for decades, and will continue to remain in that position for some time. He ushered in the concept of the Vegas megaresort and is a large reason the Strip looks the way it does today. Going forward, he will without doubt continue his innovation, and probably take shareholders with him for the ride.

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The article Earnings Miss Aside, Wynn Looks Like a Long-Term Winner originally appeared on Fool.com.

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