Shares of Station Casinos’ parent company continued their upward climb Friday after gaming industry analysts applauded the company’s early release of fourth-quarter revenue and cash flow Thursday.
Red Rock Resorts stock was up 4.2 percent to $24.70 at Friday’s Nasdaq close after analysts weighed in on the company’s early disclosure of results in a Thursday Securities and Exchange Commission filing announcing a private placement of $500 million in senior notes maturing in 2028.
Proceeds from the placement would be used to help pay off the company’s more than $3 billion in debt, to pay fees for the offering and for general corporate purposes. But it was the company’s supplemental information on early revenue projections, which were better than analysts expected, that got their attention.
The company said it expected revenue for the quarter to range from between $447.4 million and $474.2 million, well above the $431.5 million reported in the fourth quarter of 2018. The company expects net revenue of between $57.2 million to $60.6 million at the Palms, with a cash flow loss of $4.3 million. In November, the company reported a third-quarter loss of $26.8 million for the Palms.
The Palms has been under analysts’ microscopes since the company spent $690 million to overhaul the property with high-end restaurants and artwork, the development of the Kaos Dayclub and Nightclub and a makeover of the casino. The company closed Kaos in November and parted ways with DJ Marshmello and his two-year $60 million residency.
Under the headline “A little less Kaos,” analyst Barry Jonas of Atlanta-based SunTrust Robinson Humphrey said the company’s fourth quarter was better than expected.
“Palms cash flow, while still negative, was better than feared which could show we are potentially nearing an inflection point at the ramping property,” he said in a report to investors.
Other analysts had similar views.
“We expect (Red Rock Resorts) shares to trade higher at this morning’s open, as the company’s preliminary fourth quarter 2019 financial results came in well ahead of our forecast and consensus expectations,” said Steven Wieczynski, an analyst with St. Louis-based Stifel Financial, in a Thursday report to investors.
Also Thursday, Joseph Greff, an analyst with New York-based J.P. Morgan, said he continues to like Red Rock’s position in the core Las Vegas locals market, which he expects to grow 2 to 3 percent this year.
“What we think is probably underappreciated in the valuation (and likely overshadowed by the well-known 2019 challenges of the Palms) is its sizable land bank and non-cash-flow-producing asset base, which we think are likely to be divested (sans gaming entitlements) in order to reduce its balance sheet leverage,” Greff said in his Thursday report.