Station Casinos executives are more confident than ever in the Las Vegas locals market, reporting on Tuesday the company’s best fourth-quarter net revenue and adjusted cash flow in more than a decade.
Red Rock Resorts Inc., Station’s parent company, blasted past analysts’ revenue performance expectations in the fourth quarter despite two properties — Palace Station and Palms — continuing to weather construction disruptions.
“As we exit this development cycle at Palace Station and the Palms, we expect to begin generating significant free cash flow in Q4 of this year,” said Steve Cootey, executive vice president and chief financial officer for the company. “And as we shift into harvest mode, our focus moving forward will be on maximizing the financial performance of our existing properties, deleveraging the company — with a target leverage ratio of four times or less — and returning capital to our shareholders.”
The company already has begun returning capital, approving a dividend of 10 cents per share to be paid March 29 to shareholders of record on March 14.
Cootey noted Southern Nevada population’s being at an all-time high and Las Vegas being the second-fastest growing metropolitan statistical area in the county with a forecast to add 200,000 new residents by 2022. He noted employment at record levels with 91 consecutive months of growth, robust wage growth, housing sales above the national average, and $18 billion in capital projects planned or underway in the city.
All that bodes well for Station, which saw same-store growth in the fourth quarter and a promise of an even better performance once Palms amenities are completed.
Cootey said the $190 million Palace Station renovation was completed on time and on budget. By the end of the first quarter, most of the $690 million Palms upgrade will be completed with the Bobby Flay-developed Shark seafood restaurant to open, the Clique Hospitality Group-partnered Greene Street Kitchen nearly ready and the Kaos dayclub-nightclub space close to completion.
Station Casinos CEO Frank Fertitta III said it’s hard to determine just how much impact construction disruptions have had on Palms.
Cootey told an analyst that fourth-quarter numbers aren’t a good gauge of the property’s potential, particularly since the property lost more than 18,000 room nights during the quarter due to the disruptions.
“And we don’t have all the amenities on line yet, but there is light at the end of the tunnel,” Fertitta said. “All these cool amenities are going to be coming on line the first week of April so I think we’ll get a much clearer picture of our ability to drive room rates once all the amenities are online.”
For the quarter that ended Dec. 31, the company reported net income of $13.2 million, 11 cents a share, on revenue of $431.5 million. In the same quarter a year earlier, the company reported net income of $46 million, 35 cents a share, on revenue of $400.3 million.
A survey of 10 Wall Street analysts on average had projected revenue of $406.7 million for the quarter.
Red Rock shares closed up 29 cents, 1.1 percent, at the closing bell Tuesday but climbed an additional 35 cents, 1.4 percent, in after-hours trading to finish at $26.85 a share with volume slightly less than twice the daily average.
Red Rock Resorts Inc.
Fourth-quarter revenue and earnings for Las Vegas-based Red Rock Resorts Inc., operators of Station Casinos. (Nasdaq: RRR)
4Q 2018: $431.5 million
4Q 2017: $400.3 million
4Q 2018: $13.2 million
4Q 2017: $46 million
Earnings per share
4Q 2018: 11 cents
4Q 2017: 35 cents