Red Rock Resorts’ first quarter buoyed as Las Vegas properties post highest results since 2008

May 2, 2018 4:01 AM
  • CDC Gaming Reports
May 2, 2018 4:01 AM
  • CDC Gaming Reports

A big after-tax gain helped Red Rock Resorts, the parent of Station Casinos, post increases in first-quarter net income from a year earlier, although revenue fell.

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Red Rock Resorts on Tuesday said its net income was $82.1 million, or 65 per share, for the three months ended March 31, up from net income of $45.4 million, or 30 cents per share, a year earlier.

Analysts polled by Yahoo Finance expected the company to earn 35 cents per share.

The company said a $13.3 million after-tax gain associated with the extinguishment of a tax receivable liability and a $14.3 million after-tax gain in the fair value of interest rate swaps boosted the results.

Adjusted earnings before interest, taxes, depreciation and amortization rose 2.9 percent to $140.1 million from $136.2 million, boosted by an increase in Las Vegas operations.

Companywide, quarterly revenue fell 1.1 percent to $421 million from $425.7 million. Red Rock Resorts blamed the decline on continuing construction disruption linked to renovations at Palace Station and the Palms, and a drop in Native American management fees.

Las Vegas operations’ net revenue rose 0.2 percent to $395.2 million from $394.2 million. Adjusted EBITDA rose 4.2 percent $125.9 million from $120.9 million. Red Rock Resorts Chief Financial Officer Steve Cootey said both figures were the company’s highest since 2008.

As he said during the fourth-quarter earnings call in February, Cootey on Tuesday cited Las Vegas job and population growth as reasons for optimism.

“The outlook for the Las Vegas economy remains strong and should continue help sustain our positive growth going forward and all key underlying economic metrics remain favorable,” Cootey said,

The company said its Palace Station makeover was on track to finish by year’s end. Red Rock Resorts said it had incurred $116 million in costs against the $191 million project as of March 31.

This week, the hotel-casino’s famous train marquee sign, in place since 1983, was dismantled and donated to Las Vegas’ Neon Museum.

Meanwhile, the company said first-phase elements of the renovated Palms are to open this month; second-phase renovation elements are to open in 2019’s first and second quarters; third-phase elements are to open in 2019’s fourth quarter. Red Rock said it incurred $152 million in costs against that $620 million project as of March 31.

“While we are bullish on Red Rock Resort operations, we recently downgraded shares given valuation and the slew of recent Las Vegas development plans announced by competing operators,” Macquarie Securities gaming analyst Chad Beynon told investors following the earnings call. “While Red Rock Resorts has a strong track record of achieving high return on investment on projects, we are taking a slightly cautious approach until we gain confidence in the Palms opportunity.”

This past weekend, workers at the Palms voted to unionize through a secret-ballot election supervised by the National Labor Relations Board.

The Associated Press reported that 614 Palms workers voted, 84 percent of whom chose unionization. Culinary Local 226 and Bartenders Local 165 will represent about 900 Palms workers. The AP said the Palms is the fifth Station Casinos-operated property to unionize since 2015.

On a lighter note, Station Casinos granted members of its Boarding Pass loyalty rewards program free bets that the Vegas Golden Knights, the city’s first-year National Hockey League team, would win the Stanley Cup. ESPN reported that the bets are randomized, from $5 to $250 for each bet and will pay out 4-to-1.

Using forecast redemption rates, ESPN predicted that Station Casinos would award $1 million if the Knights win the Stanley Cup. As of Tuesday, the team led the Western Conference semifinals two games to one over the San Jose Sharks. The Knights would need to win this round and two more — the conference finals and the Stanley Cup finals — to win the championship.

Red Rock Resorts shares rose 1 cent or 0.03 percent, Tuesday to close at 30.20 on the Nasdaq. The shares have fallen about 10 percent in 2018.