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State of Play’s TL;DR
- Red Rock Resorts bested revenue expectations in the second quarter.
- That was despite renovation disruptions at two of its Nevada casinos.
Red Rock Resorts beat Wall Street’s revenue and adjusted EBITDA expectations in Q2, even with construction disruptions at Green Valley Ranch and Sunset Station cutting into margins.
The Nevada casino operator said steady Las Vegas locals demand and the continuing ramp up at Durango Casino & Resort helped offset some of that pressure.
Red Rock reported Q2 revenue of $510.3 million, down 3% year over year but above analyst estimates of $499.1 million. Adjusted EBITDA came in at $208 million, also ahead of expectations, while adjusted EPS of $0.66 missed the $0.74 consensus estimate.
Renovations weighed on profits
Operating margin fell to 26.8% from 32% a year earlier, reflecting construction-related disruption and other costs. CFO Stephen Cootey said the company’s Las Vegas operations still delivered “the second highest second quarter net revenue and adjusted EBITDA in our history.”
Management pointed to steady demand in the Las Vegas locals market, resilience in both gaming and non-gaming business lines, and continued momentum at Durango. At the same time, renovation work at Green Valley Ranch and Sunset Station reduced available inventory and weighed on near-term performance.
At Green Valley Ranch alone, Red Rock said it lost more than 21,000 room nights, translating to an estimated $7 million revenue impact. Cootey said that figure was “slightly lower than the $9 million we had noted in our last earnings call.”
Shares rise on news
CEO Frank Fertitta said the company expects those temporary disruptions to be outweighed by the long-term benefits of its property investments, which are intended to improve the guest experience and strengthen competitiveness.
Management said full hotel capacity at Green Valley Ranch is expected to return in September, while phased reopenings at Sunset Station should help occupancy as well as gaming and non-gaming revenue. Red Rock also said it expects to incur an $8 million one-time marketing expense in the third quarter tied to its 50th anniversary and a new brand campaign.
For casino industry watchers, the report offers a familiar tradeoff: near-term margin pressure in exchange for upgraded properties and refreshed amenities. Shares were trading at $66.38 at the time of reporting, up from $64.27 just before the earnings report.
Based on reporting by Adam Hajl for StockStory.
