Yahoo Finance Red Rock Resorts (RRR) Up 25% in 6 Months: More Room to Run?
Red Rock Resorts, Inc.’s RRR shares have gained 24.5% in the past 6 months compared with the industry’s growth of 27.6%. The company is benefiting from strong spending per visit across its portfolio, digitalization and development pipeline. However, inflationary pressure and high debt are concerning.
Let’s delve deeper.
Growth Drivers
In fourth-quarter 2022, the company witnessed strong spending per visit across its portfolio. Attributes such as strong and consistent visitation from guests (including a younger demographic), increased spending per visit, more time spent on gaming devices and a return of core customers have been adding to the positives.
The company continues to make substantial progress concerning cashless gaming. In fourth-quarter 2021, the company completed field trials with IGT (at Red Rock and Green Valley branch properties) with respect to cashless payments on the slot floor. In first-quarter 2022, the company initiated the product’s rollout at its Las Vegas properties, excluding Wildfire Taverns and Sunset Station. Given the emphasis on a single mobile digital wallet access for playing and paying purposes, RRR intends to implement the product at the remaining properties over the next two quarters.
Red Rock Resorts’ Las Vegas operations have been a key growth driver over the past few quarters and the trend is likely to continue in the coming quarters. The company is confident about a quick rebound in the Las Vegas business despite industry woes. RRR is bullish about its long-term view due to favorable supply-demand dynamic, positive long-term trends in population growth and stable regulatory environment.
The Zacks Rank #3 (Hold) company is also focusing on expansion efforts to drive growth. Meanwhile, the company continues to upgrade its pipeline of land held for development. In the fourth quarter, RRR emphasized on transactions, including Losee site, south of Cactus and the Las Vegas Boulevard. The company stated land holdings of almost 522 acres around the Las Vegas Valley.
In 2023, capital expenditure (including the development of Durango) is estimated to be $550-$600 million.
Image Source: Zacks Investment Research
Concerns
A rise in labor and commodity costs continues to hurt the company. In the fourth quarter, RRR witnessed price inflation in ordinary goods and services such as food costs, supplies, energy and construction costs. It also witnessed supply-chain disruptions. In the quarter, food and beverage expenses increased 7.8% year over year to $58.5 million. The company intends to focus on cost controls and price adjustments to counter the same.
High debt remains concerning. Outstanding debt at the fourth-quarter end amounted to $3 billion compared with $2.91 billion in the previous quarter. As of Dec 31, 2022, the company reported cash and cash equivalents of $117.3 million (compared with $101.1 million in the previous quarter), which may not be enough to manage the high debt.
Key Picks
Some better-ranked stocks in the Zacks Consumer Discretionary sector are Las Vegas Sands Corp. LVS, Hilton Grand Vacations Inc. HGV and Crocs, Inc. CROX.
Las Vegas Sands currently sports a Zacks Rank #1 (Strong Buy). LVS has a long-term earnings growth rate of 2.5%. The stock has gained 41.3% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for LVS’ 2023 sales and EPS indicates a rise of 108.4% and 217.5%, respectively, from the year-ago period’s reported levels.
Hilton Grand Vacations currently flaunts a Zacks Rank #1. HGV has a trailing four-quarter earnings surprise of 12.1%, on average. Shares of HGV have declined 17.5% in the past year.
The Zacks Consensus Estimate for HGV’s 2023 sales and EPS indicates a rise of 7.1% and 10.8%, respectively, from the year-ago period’s reported levels.
Crocs currently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 21.8%, on average. Shares of Crocs have gained 56.1% in the past year.
The Zacks Consensus Estimate for CROX’s 2023 sales and EPS indicates a rise of 12.5% and 2.5%, respectively, from the year-ago period’s reported levels.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Las Vegas Sands Corp. (LVS) : Free Stock Analysis Report
Crocs, Inc. (CROX) : Free Stock Analysis Report
Red Rock Resorts, Inc. (RRR) : Free Stock Analysis Report
Hilton Grand Vacations Inc. (HGV) : Free Stock Analysis Report
