Red Rock Resorts’ third quarter saw modest revenue growth but missed Wall Street’s top-line expectations, while profitability and adjusted EBITDA margins surpassed consensus. Management credited strong Las Vegas locals market fundamentals, continued momentum at Durango Casino Resort, and resilience across non-gaming operations despite ongoing construction. CFO Stephen Cootey emphasized, “This marks the ninth consecutive quarter of record net revenue and the fifth consecutive quarter of record adjusted EBITDA.” The company faced disruption at key properties due to renovation projects, but robust customer traffic and elevated slot play from both local and national segments offset these headwinds.
Is now the time to buy RRR? Find out in our full research report (it’s free for active Edge members).
Red Rock Resorts (RRR) Q3 CY2025 Highlights:
- Revenue: $475.6 million vs analyst estimates of $479.6 million (1.6% year-on-year growth, 0.8% miss)
- EPS (GAAP): $0.41 vs analyst estimates of $0.39 (6.8% beat)
- Adjusted EBITDA: $190.9 million vs analyst estimates of $186.9 million (40.1% margin, 2.1% beat)
- Operating Margin: 27.8%, in line with the same quarter last year
- Market Capitalization: $3.17 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Red Rock Resorts’s Q3 Earnings Call
- Daniel Politzer (JPMorgan) asked about the rationale and expected returns of Durango’s next expansion phase, particularly given its large non-gaming component. CEO Lorenzo Fertitta explained the expansion is driven by customer demand for entertainment amenities and expects returns similar to the initial build.
- Brandt Montour (Barclays) inquired about hotel performance compared to the Strip and whether softness in that market affected Red Rock’s results. President Scott Kreeger responded that the company’s regional focus insulated it from Strip volatility, and noted occupancy gains even with rooms offline.
- Stephen Grambling (Morgan Stanley) questioned the impact of Strip trends on the locals market and future development priorities. CFO Stephen Cootey emphasized the Las Vegas locals business is structurally different and highlighted the company’s resilience, while Kreeger noted ongoing planning for shovel-ready and greenfield projects.
- Chad Beynon (Macquarie) asked about the sustainability of recent cost efficiencies and margin flow-through. Kreeger attributed this to disciplined expense management and flat marketing costs, while Cootey said flow-through should remain sustainable barring major disruptions.
- Patrick Keough (Truist Securities) sought clarity on cumulative construction disruption and early performance of the tavern business. Kreeger reported that disruption is tracking below initial estimates, and the taverns are attracting younger customers and expanding the company’s database.
Catalysts in Upcoming Quarters
In the coming quarters, our team will be monitoring (1) the pace and customer response to Durango’s next phase of development, (2) the operational impact and recovery from ongoing construction at Green Valley Ranch and Sunset Station, and (3) the performance of new non-gaming amenities and the tavern business in attracting incremental customers. Additionally, we’ll track management’s execution on expense control and free cash flow conversion as more projects come online.
Red Rock Resorts currently trades at $51.70, down from $59.24 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free for active Edge members).
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