Red Rock Resorts (RRR)

Casino resort and entertainment company Red Rock Resorts (NASDAQ:RRR) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 3.2% year on year to $511.8 million. Its GAAP profit of $0.75 per share was 67.7% above analysts’ consensus estimates.

Company Overview

Founded in 1976, Red Rock Resorts (NASDAQ:RRR) operates a range of casino resorts and entertainment properties, primarily in the Las Vegas metropolitan area.

Casino operators enjoy limited competition because gambling is a highly regulated industry. These companies can also enjoy healthy margins and profits. Have you ever heard the phrase ‘the house always wins’? Regulation cuts both ways, however, and casinos may face stroke-of-the-pen risk that suddenly limits what they can or can't do and where they can do it. Furthermore, digitization is changing the game, pun intended. Whether it’s online poker or sports betting on your smartphone, innovation is forcing these players to adapt to changing consumer preferences, such as being able to wager anywhere on demand.

Competitors in the gaming and hospitality sector include Boyd Gaming (NYSE:BYD), Golden Entertainment (NASDAQ:GDEN), and MGM Resorts (NYSE:MGM).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Red Rock Resorts grew its sales at a 11.2% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the consumer discretionary sector, which enjoys a number of secular tailwinds.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Red Rock Resorts’s recent performance shows its demand has slowed as its annualized revenue growth of 8% over the last two years was below its five-year trend. Note that COVID hurt Red Rock Resorts’s business in 2020 and part of 2021, and it bounced back in a big way thereafter.

Red Rock Resorts also breaks out the revenue for its three most important segments: Casino, Dining, and Hotel, which are 67%, 18.2%, and 9.2% of revenue. Over the last two years, Red Rock Resorts’s Casino (Blackjack, Poker) and Dining (food and beverage) revenues averaged year-on-year growth of 7.3% and 2% while its Hotel revenue (overnight stays) averaged 8.9% declines.

This quarter, Red Rock Resorts reported modest year-on-year revenue growth of 3.2% but beat Wall Street’s estimates by 1.9%.

Looking ahead, sell-side analysts expect revenue to grow 2.2% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will face some demand challenges.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Red Rock Resorts’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 29.6% over the last two years. This profitability was paltry for a consumer discretionary business and caused by its suboptimal cost structure.

This quarter, Red Rock Resorts generated an operating margin profit margin of 28.1%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Red Rock Resorts’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q4, Red Rock Resorts reported EPS of $0.75, up from $0.45 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Red Rock Resorts’s full-year EPS of $2.14 to shrink by 2.4%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Red Rock Resorts has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 13.9%, lousy for a consumer discretionary business.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Red Rock Resorts historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 16.9%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. On average, Red Rock Resorts’s ROIC decreased by 1.8 percentage points annually each year over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Red Rock Resorts reported $142.5 million of cash and $3.4 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $848.6 million of EBITDA over the last 12 months, we view Red Rock Resorts’s 3.8× net-debt-to-EBITDA ratio as safe. We also see its $152.2 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Red Rock Resorts beat analysts’ EPS expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. The stock remained flat at $66.98 immediately after reporting.

Updated: February 10, 2026 at 4:07 PM EST

Before deciding whether to buy Red Rock Resorts or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

We cheer for all companies serving everyday consumers, but in the case of Red Rock Resorts, we’ll be cheering from the sidelines. First off, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. On top of that, Red Rock Resorts’s projected EPS for the next year is lacking, and its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Red Rock Resorts’s P/E ratio based on the next 12 months is 26.5x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $67.47 on the company (compared to the current share price of $66.98).