Yahoo Finance Strong Visitation Aids Red Rock Resorts (RRR) Amid High Costs
Red Rock Resorts, Inc. RRR is benefiting from strong visitation, solid Las Vegas operations and strong spend per visit. Also, the emphasis on cost-saving initiatives and development projects bodes well.
Red Rock Resorts’ shares have gained 11.1% in the past six months against the Zacks Gaming industry’s 0.6% fall. Given the successful openings of high-limit tables and slot rooms, a new casino bar and a restaurant, the company remains optimistic. The company intends to boost investments in this direction to drive growth. However, increases in costs and expenses are a concern.
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Let us discuss the factors that highlight why investors should retain the stock for now.
Growth Catalysts
Strong visitation: RRR is witnessing favorable customer trends. During first-quarter 2024, the company witnessed consistent visitation from its guests and strong spending per visit across its portfolio. Attributes such as consistent visitation from guests, increased spending per visit, more time spent on gaming devices and a return of core customers have added to the positives. The company registered growth in food and beverage and hotel segments fueled by strength in the catering business. The company intends to focus on business optimization and cost-reduction measures to drive growth.
During the quarter, the company focused on strategic investments to enhance guest amenities and drive incremental visitation. A new high-limit slot room and Blue Ribbon Sushi Bar and Grill opened at Green Valley Ranch. A Federal Donuts Chicken restaurant was launched and the Sandbar Grill, the pool bar and outside eatery at Red Rock, was remodeled. The company reported solid feedback regarding the new amenities.
Going forward, the company intends to add additional restaurant offerings at Green Valley Ranch and Palace Station properties. It also stated plans for an upgraded race and sports book, a partial casino remodel and a new Yardhouse restaurant at Sunset Station property.
Solid Las Vegas Operations: Red Rock Resorts’ Las Vegas operations have been a key growth driver in the past few quarters and the trend will likely continue in the upcoming quarters. During the first quarter, the company achieved strong results. The Las Vegas operations reported the highest net revenue and adjusted EBITDA for any first quarter in history. During the quarter, revenues from Las Vegas operations increased 12.9% year over year to $485.6 million. The adjusted EBITDA increased 7.3% year over year to $229.8 million.
The company is bullish about its long-term view, owing to favorable supply-demand dynamics, positive long-term trends in population growth and a stable regulatory environment. Attributes such as best-in-class assets and locations, unparalleled distribution and scale and a solid organic development pipeline are likely to add to the positives.
Development Projects to Drive Growth: RRR continues to focus on development projects to drive growth. The company began 2024 with strong momentum, supported by the opening of Durango, which validates the long-term growth strategy and highlights the development pipeline. With over 441 acres of prime developable land in the Las Vegas Valley, the company is well-positioned. This, along with top-tier assets and locations, allows for significant portfolio expansion and leveraging favorable demographic trends and high market entry barriers.
Concerns
The rise in labor and commodity costs continues to hurt the company. The company continues to witness the impacts of inflation and increased energy costs. It also reported elevated prices concerning food and beverage and rooms. During the first quarter of 2024, selling, general and administrative expenses increased 13.3% year over year to $104.8 million. During the quarter, food and beverage expenses increased 22.2% year over year to $73.4 million. Rooms expenses were up 16.6% year over year to $15.9 million.
Going forward, the company remains cautious of the uncertainty in the economic outlook stemming from inflation, higher interest rates, increased energy costs and increased geo-political and regional conflicts.
Zacks Rank and Stocks to Consider
Red Rock Resorts currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Consumer Discretionary sector are:
Strategic Education, Inc. STRA currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.
STRA has a trailing four-quarter earnings surprise of 36.2%, on average. The stock has surged 43.4% in the past year. The Zacks Consensus Estimate for STRA’s 2024 sales and earnings per share (EPS) indicates an increase of 6.4% and 33.3%, respectively, from the year-ago levels.
Royal Caribbean Cruises Ltd. RCL currently sports a Zacks Rank of 1. RCL has a trailing four-quarter earnings surprise of 18.3%, on average. The stock has rallied 88.9% in the past year.
The Zacks Consensus Estimate for RCL’s 2024 sales and EPS calls for growth of 16.6% and 61.9%, respectively, from the year-ago levels.
Hasbro, Inc. HAS presently flaunts a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 17.5%, on average. The stock has gained 20.2% in the year-to-date period.
The Zacks Consensus Estimate for HAS’ 2025 sales and EPS suggests an improvement of 4% and 14%, respectively, from the year-ago levels.
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