Following Red Rock's Q2 Results, Citi's Buy Rating Unchanged

Citi maintained its Buy rating on Red Rock Resorts Inc (NASDAQ: RRR) despite the company's Q2 EPS missing estimates. However, the results came in line with Citi estimates.

The brokerage's bullish stance is based on the thesis that Red Rock is a major beneficiary of a continuing recovery in the Las Vegas regional gaming market where it had an estimated 43 percent share in 2015. For the second quarter, Las Vegas operations' EBITDA rose 3 percent to $105 million, in line with Citi estimates of $106 million.

"We maintain our view that the Las Vegas regional gaming market is poised to benefit from the local residents' increasing wealth, aided by a better employment environment and the recovery of the property market," analyst Anil Daswani wrote in a note.

Native American business reported an in-line EBITDA of $20 million. The expansion of Graton Resort and Gun Lake Casino is scheduled to be completed by mid-November and 2Q17 respectively.

"When current expansions are completed, we expect EBITDA from the two contracts to grow 10% in 2017E and 11% in 2018E," Daswani continued.

Noting that the recent refinancing of the debt would reduce interest costs, the analyst raised his FY16-18 EPS estimates by 4-8 percent. The current estimates are $0.86, $0.65 and $0.73 for 2016-18.

Daswani maintained his $25 price target on the stock, which is up 4.61 percent to $22.92.

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