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Red Rock Resorts (RRR) Shares Rally 93% YTD: More Upside Left?

·5-min read

Red Rock Resorts, Inc. RRR is poised to benefit from Las Vegas operations, digitalization and development projects. This along with a focus on cost-saving efforts, bodes well.

So far this year, shares of Red Rock Resorts have surged 92.8% against the industry’s decline of 7.2%. The price performance was backed by solid earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in all of the trailing four quarters. Earnings estimates for 2021 and 2022 have moved up 19% and 2.5%, respectively, in the past 60 days. This positive trend signifies bullish analysts’ sentiments and justifies the company’s Zacks Rank #2 (Buy), indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Factors Driving Growth

Las Vegas Operations a Driving Factor: Red Rock Resorts’ Las Vegas operations have been a key growth driver in the past few quarters and the trend is likely to continue in the coming quarters. The company is bullish on long-term view owing to favorable supply-demand dynamic, positive long-term trends in population growth and a stable regulatory environment. Moreover, attributes like best-in-class assets and locations, unparallel distribution and scale along with solid organic development pipeline, are likely to add to the positives.

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Digital Efforts: The company continues to make substantial progress with respect to cashless gaming. During the third quarter, the company initiated field trials with IGT (at Red Rock and Green Valley branch properties) to introduce cashless payments on the slot floor. Going forward, Red Rock Resorts intends to offer a single mobile digital wallet access for playing and paying purpose at each of its Las Vegas properties. Apart from this, the company entered into a partnership with GAN Limited (in October 2021) to build and deploy the next-generation infrastructure stations STN Sports online sports platform, mobile applications and retail over-the-counter and kiosk-based sports betting throughout Nevada. The company stated that the product launch is subject to regulatory approvals.

Focus on Development Projects: Following a favorable decision from the California Supreme Court (in August 2020), Red Rock Resorts focused more on the North Fork development project. The cost of completion of this project, excluding any financing costs, is expected in the range of $350-$400 million. The company stated that the project is currently in the planning and budgeting stage.

The company has been focusing on the Durango development project. Located off the 215 Expressway and Durango Drive in Southwest Las Vegas Valley, the project is likely to offer 73,000 square feet of casino space, 2,000 slots and 40 table games, a state-of-the-art sports book, 200 hotel rooms along with four full-service food and beverage outlets. Currently in the planning and budgeting stage, the company expects to start the project by first-quarter 2022. It is optimistic on this development pipeline owing to the location as well as the absence of unrestricted gaming competitors (within a 5-mile radius of the project site). The estimated duration for construction is anticipated between 18 months and 24 months.

Cost-Saving Efforts: During third-quarter 2021, the company’s performance benefited from a number of initiatives — streamlining of operations, optimization of marketing initiatives and renegotiating vendor and third-party agreements. Backed by these initiatives, the company continues to expect savings of more than $200 million in annual costs compared with its pre-pandemic cost structure. The initiatives will support efficient production and are also likely to drive margins and free cash flow.

Other Key Picks

Some other top-ranked stocks in the Consumer Discretionary sector include Hilton Grand Vacations Inc. HGV, Bluegreen Vacations Holding Corporation BVH and Camping World Holdings, Inc. CWH.

Hilton Grand Vacations sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 411.1%, on average. Shares of the company have increased 57.9% so far this year.

The Zacks Consensus Estimate for Hilton Grand Vacations’ current financial-year sales and earnings per share (EPS) suggests growth of 222.1% and 170.8%, respectively, from the year-ago period’s levels.

Bluegreen Vacations flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 695%, on average. Shares of the company have surged 127.7% so far this year.

The Zacks Consensus Estimate for Bluegreen Vacations’ current financial-year sales and EPS indicates growth of 27.5% and 199.3%, respectively, from the year-ago period’s levels.

Camping World carries a Zacks Rank #2. The company benefits from the launch of a fresh peer-to-peer RV rental marketplace and a mobile service marketplace. It has been investing heavily in product development.

Camping World has a trailing four-quarter earnings surprise of 70.9%, on average. Shares of the company have appreciated 58.2% so far this year. The Zacks Consensus Estimate for CWH’s financial-year sales and EPS suggests growth of 25.9% and 77.1%, respectively, from the year-ago period’s levels.

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Bluegreen Vacations Holding Corporation (BVH) : Free Stock Analysis Report

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