Core Insights - The article emphasizes the importance of fundamental analysis in identifying undervalued stocks with growth potential [1]. Group 1: Company Analysis - The analyst has a broad career covering both Brazilian and global stocks, indicating a diverse investment perspective [1]. - The focus is on value investing, which suggests a strategy aimed at finding stocks that are trading for less than their intrinsic values [1]. Group 2: Market Perspective - The article does not provide specific market data or trends, but it implies a general approach to investment that prioritizes fundamental metrics over market speculation [1].

Core Points - Red Rock Resorts, Inc. will release its financial results for the third quarter of 2025 on October 28, 2025, followed by a conference call at 4:30 p.m. ET [1] - The conference call will include prepared remarks and a question and answer session [1] - A live audio webcast of the call will be available on the company's website [2] Conference Call Details - Investors can join the conference call by dialing (888) 317-6003 or (412) 317-6061 for international calls, using the passcode 4077317 [2] - A replay of the call will be accessible until November 4, 2025, through specific dialing numbers [3] - An audio archive of the call will also be available on the company's website [3] Company Overview - Red Rock Resorts is a holding company that manages Station Casinos LLC, a leading provider of gaming, hospitality, and entertainment in Las Vegas, Nevada [4] - Station Casinos operates various properties throughout the Las Vegas valley, offering amenities such as restaurants, entertainment venues, and traditional casino gaming [4] - The company owns and operates multiple casino resorts, including Red Rock Casino Resort Spa and Green Valley Ranch Resort Spa Casino, among others [4]

Core Insights - Sin stocks, associated with industries like alcohol, tobacco, cannabis, weapons, and gambling, are often seen as morally controversial but have a history of delivering strong returns [2][3] - These stocks attract investors due to resilient demand, high profit margins, and strong cash flows, making them profitable even during economic downturns [3][4] Economic Defensiveness - Sin stocks benefit from persistent demand regardless of economic cycles, as people continue to engage in smoking, drinking, and gambling [4] - Companies in this sector often possess strong pricing power, brand loyalty, and consistent cash flows, appealing to investors focused on returns [4] Regulatory Moats - Many sin stocks enjoy regulatory barriers that deter new entrants, allowing established companies to dominate their markets [6] - Government oversight and compliance costs create high barriers, which, combined with aggressive marketing, help sustain profitability [6] Company Examples - Altria Group (MO) has maintained dividends and returns despite scrutiny and regulation, focusing on shareholder value through consistent payouts and buybacks [5] - Las Vegas Sands Corp. (LVS) operates in regions with entrenched gambling cultures, holding licenses and infrastructure that are difficult to replicate [7] Sector Trends - Consumer preferences are shifting, with alcohol companies benefiting from premiumization and tobacco firms pivoting to reduced-risk products [10] - The cannabis sector is expanding in legalized regions, presenting high-growth potential but also increased volatility [10] Regulatory Impact - Stricter regulations can limit operations, while favorable changes, such as new gambling legislation, can create new opportunities [11] - Global expansion into less restrictive markets enhances growth prospects for sin stocks [11] Investment Opportunities - Red Rock Resorts, Inc. (RRR) is positioned in the Las Vegas locals gaming market, benefiting from high barriers to entry and a strong loyalty program [14][15] - Churchill Downs Incorporated (CHDN) combines traditional racing with technology-driven platforms, focusing on disciplined capital deployment and innovation [17][18] - Anheuser-Busch InBev (BUD) leads in brewing with a strategy focused on premium segments and digital engagement, ensuring resilience across markets [19][20]

Core Insights - Baron Growth Fund's performance in Q2 2025 was a 0.86% increase, significantly lagging behind the Russell 2000 Growth Index's 11.97% gain and the Russell 3000 Index's 10.99% return, indicating a challenging quarter for the fund's strategy focused on high-conviction businesses [1] Company Analysis: Red Rock Resorts, Inc. - Red Rock Resorts, Inc. (NASDAQ:RRR) operates in the casino and entertainment sector, specifically targeting the Las Vegas Locals market, with a one-month return of -2.21% and a 52-week gain of 14.46% [2] - The stock closed at $61.58 on September 23, 2025, with a market capitalization of $6.309 billion, reflecting its significant market presence [2] - The company is undergoing renovations and expansions of its core assets, which may cause short-term disruptions but are expected to enhance earnings growth and cash flow in the following year, supporting further development and dividend payments [3] - Red Rock's stock is currently trading at a discount to its historical average, which is viewed as attractive given its growth prospects and improving balance sheet [3] Hedge Fund Interest - Red Rock Resorts, Inc. was held by 32 hedge fund portfolios at the end of Q2 2025, an increase from 26 in the previous quarter, indicating growing interest among institutional investors [4] - Despite this interest, the company is not considered among the 30 most popular stocks among hedge funds, with some analysts suggesting that certain AI stocks may offer better upside potential with less risk [4]

Industry Overview - The Zacks Gaming industry is experiencing growth due to increased gaming revenues in Macau, strong demand for sports betting, and robust U.S. commercial gaming revenues [1][3][4] - The industry includes companies that operate integrated casinos, hotels, and entertainment resorts, as well as those providing technology products and services in gaming markets [2] Key Themes - Macau's gross gaming revenues (GGR) reached MOP 22.15 billion ($2.76 billion) in August, marking a 12.2% year-over-year increase and a 0.1% gain from July [3] - U.S. commercial gaming revenues rose 9.8% year-over-year in Q2 2025, totaling $19.44 billion from traditional casino games, sports betting, and iGaming [4] - The legalization of sports betting across multiple states has significantly contributed to industry growth, with popular gaming applications including DraftKings and FanDuel [5] Economic Factors - Ongoing economic uncertainty, rising inflation, and geopolitical tensions pose challenges to the gaming industry, potentially reducing consumer discretionary spending [6] Industry Performance - The Zacks Gaming industry ranks 96, placing it in the top 39% of over 245 Zacks industries, indicating positive near-term prospects [7][8] - The industry has outperformed the S&P 500 Index, rising 37.3% over the past year compared to the S&P 500's 19.9% growth [10] Valuation Metrics - The industry has a trailing 12-month EV/EBITDA ratio of 21.45, which is higher than the S&P 500's ratio of 18.35, reflecting a premium valuation [13] Notable Companies - **Boyd Gaming**: Benefits from a diversified business model and operational efficiencies, with a 4.9% increase in 2025 earnings estimates to $6.89 [17][18] - **Red Rock Resorts**: Strong performance from Durango Casino Resort and Las Vegas operations, with a 12.7% increase in 2025 earnings estimates to $1.77 [20][22] - **Melco Resorts & Entertainment**: Strong momentum in Macau operations, with a 69% surge in 2025 earnings estimates to $0.49 [24][25]

Core Viewpoint - Red Rock Resorts (RRR) has received an upgrade to a Zacks Rank 1 (Strong Buy), indicating a positive outlook on its earnings estimates, which is a significant factor influencing stock prices [1][4]. Earnings Estimates and Ratings - The Zacks rating system is based solely on a company's changing earnings picture, tracking the Zacks Consensus Estimate for EPS from sell-side analysts [2]. - The recent upgrade reflects an increase in earnings estimates, which is correlated with near-term stock price movements, making the Zacks rating system valuable for investors [3][5]. Impact of Institutional Investors - Changes in earnings estimates significantly affect the fair value calculations of stocks by institutional investors, leading to buying or selling actions that influence stock prices [5]. Business Improvement Indicators - Rising earnings estimates and the Zacks rating upgrade suggest an improvement in Red Rock Resorts' underlying business, which could lead to higher stock prices as investors respond positively [6]. Importance of Earnings Estimate Revisions - Empirical research shows a strong correlation between earnings estimate revisions and stock movements, highlighting the importance of tracking these revisions for investment decisions [7]. Zacks Rank System Performance - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [8]. Specific Earnings Estimates for Red Rock Resorts - Red Rock Resorts is expected to earn $1.77 per share for the fiscal year ending December 2025, with no year-over-year change, but the Zacks Consensus Estimate has increased by 13% over the past three months [9]. Overall Market Positioning - The upgrade to Zacks Rank 1 places Red Rock Resorts in the top 5% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [10][11].

Group 1 - Investor sentiment is influenced by clinical trial results, technological advancements, and corporate partnerships, making market analysis essential for navigating investment opportunities [1] - Viking Therapeutics, Inc. (VKTX) has shown a downward bias following the release of Phase 2 trial data for its VK2735 pill, a dual agonist targeting GLP-1 and GIP receptors [2] - Palantir Technologies Inc. (PLTR) shares are expected to reach $200 according to market commentary [2] Group 2 - Richtech Robotics Inc. (RRR) announced a $100 million at-the-market offering, indicating a significant capital raise [3] - Richtech Robotics shares declined by 5.2% to close at $2.5400, reflecting market sentiment [5] - Viking Therapeutics shares fell by 1.2% to settle at $26.53, indicating a negative market reaction [5]

Core Insights - Red Rock Resorts reported strong Q2 2025 earnings, with both earnings and revenues exceeding estimates, indicating positive financial performance [2][3] Financial Performance - Adjusted EPS for Q2 2025 was 95 cents, surpassing the Zacks Consensus Estimate of 40 cents, and up from 59 cents in the prior-year quarter [3] - Quarterly revenues reached $526.3 million, beating the Zacks Consensus Estimate of $485 million, and grew 8.2% year over year from $486.4 million [3] - Net income increased to $108.3 million from $69.8 million in the prior-year quarter [5] - Adjusted EBITDA was $229.4 million, a 13.7% increase from $201.7 million year over year, with an adjusted EBITDA margin expanding to 43.6% from 41.5% [5] Segment Performance - Las Vegas Operations generated revenues of $513.3 million, up 6.2% from $483.2 million in the prior-year quarter, with adjusted EBITDA of $239.4 million, up 7.3% from $223.1 million [4] - Native American Management reported revenues and adjusted EBITDA of $10 million, reflecting cumulative development fee recognition [4] Financial Position - As of June 30, 2025, cash and cash equivalents were $145.2 million, up from $122.8 million as of March 31, 2025, while outstanding debt remained at $3.4 billion [6] - The board declared a cash dividend of $0.25 per share, payable on September 30, 2025, demonstrating commitment to shareholder returns [6] Market Outlook - There has been an upward trend in estimates for Red Rock Resorts, with the consensus estimate shifting by 11.72% recently [7] - The stock has a Growth Score of B and a Momentum Score of B, with an aggregate VGM Score of B, indicating a balanced investment profile [9] Industry Context - Red Rock Resorts operates within the Zacks Gaming industry, where Las Vegas Sands reported revenues of $3.18 billion for the last quarter, reflecting a year-over-year increase of 15% [11] - Las Vegas Sands is expected to post earnings of $0.61 per share for the current quarter, indicating a change of 38.6% from the year-ago quarter [12]

Core Viewpoint - Boyd Gaming (BYD) is currently viewed as a superior value option compared to Red Rock Resorts (RRR) based on various valuation metrics and earnings outlook [3][7]. Valuation Metrics - BYD has a forward P/E ratio of 12.00, significantly lower than RRR's forward P/E of 33.45 [5]. - The PEG ratio for BYD is 2.34, while RRR's PEG ratio is slightly higher at 2.38, indicating BYD's better valuation relative to its expected earnings growth [5]. - BYD's P/B ratio stands at 4.75, compared to RRR's much higher P/B of 20.96, further supporting BYD's valuation advantage [6]. Earnings Outlook - BYD is currently experiencing an improving earnings outlook, which is a positive indicator in the Zacks Rank model, contributing to its higher ranking [3][7]. - The Zacks Rank for BYD is 2 (Buy), while RRR holds a 3 (Hold) ranking, reflecting the stronger earnings estimate revisions for BYD [3].

Part I. Financial Information [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Red Rock Resorts, Inc.'s unaudited condensed consolidated financial statements for periods ended June 30, 2025, are presented, detailing balance sheets, income, equity, and cash flows [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet reflects a slight decrease in total assets as of June 30, 2025, with stable liabilities and a decline in cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $145,201 | $164,383 | | Total current assets | $286,892 | $295,364 | | Property and equipment, net | $2,841,613 | $2,781,915 | | Total assets | $4,032,442 | $4,045,531 | | **Liabilities & Equity** | | | | Total current liabilities | $322,401 | $325,202 | | Long-term debt, less current portion | $3,349,294 | $3,354,567 | | Total liabilities | $3,735,388 | $3,738,698 | | Total stockholders' equity | $297,054 | $306,833 | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Net revenues and net income attributable to Red Rock Resorts, Inc. significantly increased for both the second quarter and six-month period ended June 30, 2025 Q2 2025 vs Q2 2024 Performance (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Revenues | $526,273 | $486,403 | | Operating Income | $168,028 | $140,234 | | Net Income | $108,253 | $69,810 | | Net Income Attributable to Red Rock | $56,404 | $35,676 | | Diluted EPS (Class A) | $0.95 | $0.59 | Six Months 2025 vs 2024 Performance (in thousands, except per share data) | Metric | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Net Revenues | $1,024,134 | $975,300 | | Operating Income | $322,381 | $295,758 | | Net Income | $194,203 | $148,181 | | Net Income Attributable to Red Rock | $101,153 | $78,511 | | Diluted EPS (Class A) | $1.69 | $1.29 | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity decreased as of June 30, 2025, influenced by net income, dividends, distributions, and stock repurchases - For the six months ended June 30, 2025, the company paid dividends of **$89.6 million** and repurchased **$30.9 million** of Class A common stock[14](index=14&type=chunk) - In May 2025, the company declared a special cash dividend of **$1.00** per share of Class A common stock[57](index=57&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities for the six months ended June 30, 2025, was offset by significant cash used in investing and financing activities Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $284,667 | $269,003 | | Net cash used in investing activities | ($72,461) | ($185,072) | | Net cash used in financing activities | ($231,388) | ($85,068) | | **Decrease in cash and cash equivalents** | **($19,182)** | **($1,137)** | - Investing activities included **$146.4 million** in capital expenditures and proceeds of **$110.5 million** from the repayment of Native American development costs[16](index=16&type=chunk) [Notes to Condensed Consolidated Financial Statements (unaudited)](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) The notes provide critical context to the financial statements, detailing accounting policies, the North Fork development project, long-term debt, share-based compensation, and segment reporting - The company has development and management agreements for the North Fork Project in California. In Q2 2025, the company recognized a **$10.0 million** cumulative development fee and an **$8.5 million** gain after receiving a **$110.5 million** repayment on advances[34](index=34&type=chunk)[36](index=36&type=chunk) - Total long-term debt stood at **$3.4 billion** as of June 30, 2025, primarily consisting of a Term Loan B Facility and several series of Senior Notes[40](index=40&type=chunk) - The company's operations are aggregated into two reportable segments: Las Vegas operations and Native American development. Las Vegas operations generated **$513.3 million** in net revenues and **$239.4 million** in Adjusted EBITDA in Q2 2025[78](index=78&type=chunk)[80](index=80&type=chunk) - The company extended its **$600 million** equity repurchase program through December 31, 2025. As of June 30, 2025, **$278.1 million** remained authorized for repurchase[60](index=60&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the financial results for Q2 and H1 2025, highlighting revenue growth driven by casino performance and the North Fork Project, alongside solid liquidity and capital resource management [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Net revenues and operating income significantly increased in Q2 2025, primarily driven by strong casino performance and a development fee from the North Fork Project Q2 2025 vs Q2 2024 Revenue Breakdown (in thousands) | Revenue Source | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Casino | $344,796 | $319,629 | 7.9% | | Food and beverage | $94,374 | $91,718 | 2.9% | | Room | $51,187 | $50,142 | 2.1% | | Development fees | $10,008 | $— | n/m | | **Net revenues** | **$526,273** | **$486,403** | **8.2%** | - Casino revenue growth in Q2 2025 was driven by a **5.8%** increase in slot handle and a **3.9%** increase in table games hold percentage compared to the prior year period[113](index=113&type=chunk) - A **$10.0 million** cumulative development fee was recognized in Q2 2025 related to the North Fork Project after financing for the project was secured[116](index=116&type=chunk) - A gain of **$8.5 million** on Native American development was recognized in Q2 2025, representing the excess of proceeds received over the carrying amount of reimbursable advances for the North Fork Project[124](index=124&type=chunk) [Adjusted EBITDA](index=30&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA, a key non-GAAP performance measure, increased in Q2 2025, primarily driven by contributions from Las Vegas operations and Native American development Adjusted EBITDA Reconciliation (in thousands) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income | $108,253 | $69,810 | | Adjustments (Depreciation, Interest, etc.) | $121,106 | $131,847 | | **Adjusted EBITDA** | **$229,359** | **$201,657** | Adjusted EBITDA by Segment (in thousands) | Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Las Vegas operations | $239,444 | $223,147 | | Native American development | $10,008 | $— | | Corporate and other | ($20,093) | ($21,490) | | **Total Adjusted EBITDA** | **$229,359** | **$201,657** | [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position as of June 30, 2025, with sufficient cash and credit availability to fund operations, debt service, and shareholder returns - As of June 30, 2025, the company had **$145.2 million** in cash and cash equivalents and **$897.4 million** available under its Revolving Credit Facility[136](index=136&type=chunk) - Anticipated capital expenditures for the remainder of 2025 are approximately **$180 million** to **$230 million**[137](index=137&type=chunk) - The company has a completion guaranty for the North Fork Project, capped at a commitment of **$425 million**, but management believes it is not probable that funding will be necessary[139](index=139&type=chunk) - The equity repurchase program was extended to December 31, 2025, with **$278.1 million** remaining authorized for repurchases as of June 30, 2025[140](index=140&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate fluctuations on its long-term debt, managed through interest rate collar agreements, with no material changes since year-end 2024 - The company's main market risk is interest rate risk from its long-term debt. It uses interest rate collars to manage this exposure[160](index=160&type=chunk) [Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level[161](index=161&type=chunk) - No material changes were made to the company's internal control over financial reporting during the most recent fiscal quarter[162](index=162&type=chunk) Part II. Other Information [Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various routine lawsuits, none of which are expected to have a material impact on its financial condition or operations - The company is a defendant in various routine lawsuits but does not expect them to have a material impact[163](index=163&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors have been reported since the Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors were reported since the last Annual Report on Form 10-K[164](index=164&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2025, the company repurchased Class A common stock, with a significant amount remaining authorized under its equity repurchase program Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | | April 2025 | — | $— | $308,970,496 | | May 2025 | 671,677 | $45.92 | $278,115,032 | | June 2025 | — | $— | $278,115,032 | | **Total** | **671,677** | **$45.92** | **$278,115,032** | [Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[169](index=169&type=chunk) [Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures - None[169](index=169&type=chunk) [Other Information](index=36&type=section&id=Item%205.%20Other%20Information) No directors or executive officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025 - None of the Company's directors or executive officers adopted, terminated or modified a Rule 10b5-1 trading arrangement during Q2 2025[169](index=169&type=chunk) [Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including Sarbanes-Oxley Act certifications and XBRL data files