The ongoing disruption of two Station Casinos’ properties dampened fourth-quarter earnings for Las Vegas-based Red Rock Resorts, company officials said Tuesday.
But the company, operators of Southern Nevada’s largest locals casino chain, beat analysts’ expectations.
Red Rock reported earnings of $46 million, 35 cents a share, on revenue of $394 million for the quarter that ended Dec. 31. For the same quarter a year earlier, the company had earnings of $41.1 million, 37 cents a share, on revenue of $394.6 million.
The average of a survey of eight analysts projected the company would earn 27 cents a share.
Recently approved tax reform legislation provided a one-time $2.1 million benefit in earnings for the quarter, but the biggest factor in the company’s revenue lull was attributed to construction disruptions at the Palace Station and the Palms.
The Palace Station renovation project is on schedule and as of Dec. 31, the company spent $80 million toward the $191 million project that is expected to be completed in phases by the end of 2018.
Accelerating Palms improvements
Meanwhile, the company announced Tuesday that it is accelerating improvements to the Palms.
The new phase of redevelopment will include a casino floor expansion that will add 300 new slot machines, 16 table games and a Hong Kong-style dim sum restaurant. New digital signage will be added to the exterior and a casino connector will integrate the adjacent 600-room Palms Place and the existing self-park garage into the property.
The total budget for the Palms redevelopment, including construction costs, capitalized interest and pre-opening expenses, has increased to $620 million as of Dec. 31 — $77 million has been spent.
The first phase of improvements is expected to be completed in the second quarter. Parts of the second phase are expected to be finished in the first and second quarters of 2019, with the third to open in the fourth quarter of next year.
“What we’re going to do with this casino expansion is going to much, much, much improve the ability to get gaming revenue out of those 600 hotel rooms,” Chairman and CEO Frank Fertitta III said in the company’s Tuesday earnings call with investors.
‘One of the nicest’
“We’ll be nearly a football field closer to those rooms than they currently are right now, so we’re feeling really good about getting conversion out of that. Anybody who hasn’t been through the Palms, I encourage you to walk through it. The property speaks for itself. When people see what this renovated property looks like, what it’s going to offer in terms of restaurants, world-renowned chefs, art and new attractions, it’s going to be one of the nicest properties in the city of Las Vegas by far.”
Chief financial officer Stephen Cootey rattled through a list of statistics showing the Southern Nevada economy strong in population, job growth and home sales, with increases in employment and wages.
Cootey pointed to the $16 billion in new projects coming or underway in Southern Nevada, including development of the Las Vegas stadium and expansion of the Las Vegas Convention Center.
He said that growth translates into more disposable income, which Station is positioned to capitalize on.
The hybrid Palace Station and Palms properties appeal to both locals and tourists, which executives say gives the company an edge on competitors.
Best gaming market
“We remain extremely bullish on both of these opportunities and believe that our significant investment in these type of properties that appeal to local guests and tourists alike will generate very solid returns upon their completion,” Cootey said. “Las Vegas is the best gaming market in the country.”
Red Rock Resorts stock closed down 3 percent, $1.03, to $33.51 a share on strong volume Tuesday. It was unchanged in after-hours trading.
The company also announced Tuesday that it is paying a 10-cents-a-share cash dividend on March 30 to shareholders of record on March 15.
Red Rocks Resorts Inc.
Fourth-quarter revenue and earnings for Las Vegas-based Red Rocks Resorts Inc. (Nasdaq: RRR).
4Q 2017 4Q 2016 Change
Revenue $394 million $394.6 million -0.1%
Earnings $46 million $41.1 million +11.9%
Earnings per share 35 cents 37 cents -5.4%