RRR Q1 Earnings Call: Durango Ramp and Capital Returns Shape Outlook

Casino resort and entertainment company Red Rock Resorts (NASDAQ: RRR) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 1.8% year on year to $497.9 million. Its non-GAAP profit of $0.51 per share was 12.9% above analysts’ consensus estimates.

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StockStory’s Take

Red Rock Resorts’ first quarter results reflected steady momentum in its Las Vegas portfolio, with management attributing the outcome to continued growth at the new Durango Casino & Resort and sustained demand from local customers. CEO Frank Fertitta III highlighted increased visitation and higher customer engagement, particularly among carded players in the Durango area, as key factors supporting the quarter’s performance. The company also benefited from disciplined cost control and operational efficiency, including lower utility expenses and stable payroll levels, which contributed to stable operating margins.

Looking ahead, management maintained a positive outlook, citing ongoing demographic growth in the Las Vegas Valley and a robust development pipeline. CFO Stephen Cootey emphasized that new projects, renovations at Sunset Station and Green Valley Ranch, and the expansion at Durango are expected to support future growth. However, management also acknowledged potential headwinds, such as construction cost pressures from tariffs and possible short-term disruption from ongoing property upgrades. The leadership team pointed to a balanced approach between reinvestment and capital returns, including a newly declared special dividend, as central to their strategy for the remainder of the year.

Key Insights from Management’s Remarks

Red Rock Resorts’ management discussed several developments affecting recent performance and future prospects. A notable driver was the successful ramp of Durango, while the broader Las Vegas locals market continued to show resilience and demographic growth.

• Durango ramp and customer acquisition: Management reported that Durango added over 95,000 new customers to the database within its first year. The property is on pace to become one of the company’s highest-margin assets, with return on invested capital net of cannibalization reaching nearly 16%.
• Revenue backfill at Red Rock: Some cannibalization from Durango’s opening impacted the Red Rock property, but management stated that revenue recovery is ahead of historical pace and expects full backfill over the next several years, supported by local population growth.
• Operational discipline and cost control: Lower utility costs—down over 35% year over year—and stable payroll expenses contributed to margin stability. Management noted that expense management offset typical seasonal visitation patterns this quarter.
• Expansion and renovation projects: Significant capital is being allocated to expand Durango and renovate Sunset Station and Green Valley Ranch. These projects include adding high-limit gaming spaces, new dining and entertainment venues, and a refreshed hotel and convention space, with management viewing them as key to attracting new demographics and supporting higher returns.
• Financing and capital returns: The company closed construction financing for the North Fork project, reducing the need for balance sheet funding, and announced a special cash dividend to shareholders. Management described this as part of a long-term strategy to balance reinvestment and shareholder returns.

Drivers of Future Performance

Management’s outlook for the remainder of the year is shaped by continued investment in property upgrades, demographic growth in key Las Vegas areas, and a focus on both operational discipline and shareholder returns.

• Las Vegas Valley expansion: The company expects ongoing population growth, particularly in Summerlin and surrounding communities, to support demand at its core properties and drive revenue backfill at Red Rock.
• Project completion and disruption risk: Major projects at Durango, Sunset Station, and Green Valley Ranch are expected to boost future profitability, but management acknowledged the likelihood of short-term disruption as renovations intensify through the year.
• Potential cost headwinds: Management cited tariffs and construction material sourcing challenges as possible risks to project budgets, but expects disciplined procurement and contract contingencies to limit impact to 4–6% of announced project costs.

Top Analyst Questions

• Carlo Santarelli (Deutsche Bank): Asked about margin flow-through and sportsbook performance; management credited stronger sports betting results, stable payroll, and lower utilities for margin gains.
• John DeCree (CBRE): Inquired about the rationale behind the special dividend and capital allocation; CFO Stephen Cootey linked the dividend to capital returned from the North Fork project and stressed a balanced capital return approach.
• Shaun Kelley (Bank of America): Questioned the impact of construction cost inflation and tariffs; management said cost impacts should be manageable and are being addressed through sourcing flexibility and contract terms.
• Barry Jonas (Truist Securities): Asked about the ability to offset rising costs; management stated it is seeking alternative suppliers and does not plan to pass costs to customers unless necessary.
• David Katz (Jefferies): Explored the company’s openness to operating leased properties; management reiterated a preference for ownership but remains open to evaluating leasing opportunities selectively.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be watching (1) the pace of customer acquisition and revenue ramp at Durango as expansion is completed, (2) the extent of disruption and subsequent recovery at Sunset Station and Green Valley Ranch as renovations progress, and (3) how efficiently Red Rock Resorts manages construction cost pressures and procurement challenges in an inflationary environment. Execution on these initiatives will be key markers for sustained growth and margin stability.

Red Rock Resorts currently trades at a forward P/E ratio of 28.8×. In the wake of earnings, is it a buy or sell? See for yourself in our free research report.

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