Zacks Analyst Blog Highlights: Chesapeake Energy, AvalonBay Communities, MGM Resorts International, Las Vegas Sands and Wynn Resorts

For Immediate Release

Chicago, IL – August 05, 2010 – Zacks.com Analyst Blog features:

Chesapeake Energy Corp. (CHK - Analyst Report), AvalonBay Communities Inc. (AVM), MGM Resorts International (MGM - Analyst Report), Las Vegas Sands Corp. (LVS - Analyst Report) and Wynn Resorts Ltd. (WYNN - Analyst Report).

Here are highlights from Wednesday’s Analyst Blog:

Chesapeake Tops on Higher Volumes

Chesapeake Energy Corp. (CHK - Analyst Report) reported sharper-than-expected second-quarter earnings of 75 cents per share, well above the Zacks Consensus Estimate of 69 cents and year-earlier profit of 62 cents. Total revenue increased more than 20% to $2.01 billion, but was below the Zacks Consensus Estimate of $2.45 billion.

Earnings came in above our expectations due to a whopping 14% increase in production volumes, partially offset by a charge related to the redemption of debt.

Operational Performance

Chesapeake’s average daily production in the quarter increased 14% year over year and 8% sequentially to 2.79 billion cubic feet equivalent (Bcfe), of which natural gas was 90%. The percentage of natural gas production to total volumes came down by 2%. Importantly, the percentage of revenue from liquids was 17% of realized production revenue compared with 14% in the year-earlier quarter.

Natural gas equivalent realized price in the reported quarter was $6.140 per thousand cubic feet (Mcfe) versus $5.89 in the year-earlier quarter. Average realizations for natural gas were $5.66 per Mcf compared with $5.56 per Mcf in the year-earlier quarter. Realizations came in at $61.43 per barrel of liquids compared with $56.72 per barrel in the year-ago quarter.

On the cost front, production expenses reduced 11.6% from the year-earlier level to 84 cents per Mcfe. Cash flow from operations increased 12% year over year to $1.13 billion.

At the end of the quarter, Chesapeake had a cash balance of $601 million. Debt balance stood at $10.5 billion, representing a debt-to-capitalization ratio of 41.5%.

AvalonBay Tops Estimates 

AvalonBay Communities Inc. (AVM), a leading real estate investment trust (REIT), reported fiscal 2010 second quarter funds from operations (FFO) of $87.8 million or $1.04 per share, compared with $71.8 million or $0.90 per share in the year-earlier quarter. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. The second-quarter 2010 FFO was well ahead of the Zacks Consensus Estimate of $1.00.

Total revenues during the reported quarter increased 3.9% year over year to $220.5 million. Total revenues during the quarter also exceeded the Zacks Consensus Estimate of $218 million. Same-store quarterly rental revenues decreased 2.1% year over year due to a 3.3% dip in average rental rates, partially offset by 1.2% increase in economic occupancy.

Same-store revenue decreased across all geographic segments, except Mid-Atlantic. Same-store operating expenses increased 2.5% during the quarter compared with the year-ago period. Same-store net operating income (NOI) during the quarter decreased 4.4% year over year to $105.5 million.

The company did not start any new development work during the quarter. AvalonBay completed the redevelopment of Avalon Woodland Hills, California, which included 663 apartment homes, for a total cost of $38.5 million. The company also started redevelopment work on Avalon Summit in Massachusetts during the quarter, which contains 245 apartment homes, at a total estimated cost of $9.1 million.

Loss Widens for MGM

MGM Resorts International (MGM - Analyst Report) reported its second-quarter 2010 adjusted loss of 35 cents per share, well above the Zacks Consensus Estimate of a loss of 24 cents and the year-earlier loss of 12 cents. On a GAAP basis, net loss per share was $2.00 versus a loss of 60 cents recorded in the comparable quarter last year. The loss widened mainly due to impairment charges of $1.64 per share associated with CityCenter and a non-cash charge of 4 cents for CityCenter related to its residential inventory.

Net revenues rose 5.5% sequentially and 2.9% year over year to $1.54 billion outpacing the Zacks Consensus Estimate of $1.45 billion. Excluding revenues from reimbursed costs, primarily payroll-related for managing CityCenter, MGM Resorts earned net revenues of $1.45 billion, down 2% year over year.

Inside the Headline Numbers

Total casino revenues declined 6% year over year due to lower revenues from both slots and table games. Revenues from slots fell 3% during the quarter. MGM Resorts’ table games volume, excluding baccarat, plunged 7% in the quarter, while baccarat volume increased 10% from the year-earlier quarter.

The overall table games hold as a percentage of turnover in the quarter was at the lower end of the company’s normal range of 18% to 22%. Bellagio, The Mirage, and Mandalay Bay were significantly hurt by lower table games hold, partially offset by MGM Grand. These factors led to an 11% decrease in table games revenue in the quarter.

Revenues from rooms fell 1% primarily on account of Las Vegas Strip where RevPAR (Revenue per Available Room) dropped 2%. CityCenter reported net revenues of $401 million and an operating loss of $128 million in the second quarter.

MGM Resorts recorded an operating loss of $1.0 billion compared with an operating income of $131 million in the year-earlier quarter. The operating loss related to CityCenter was partially offset by MGM Macau, which posted an operating income of $40 million in the quarter under review. MGM Macau registered a huge improvement from the year-earlier quarter’s loss of $8 million. Financial Position

At quarter-end, MGM Resorts’ total cash balance was $1.01 billion. Total debt outstanding was $13.0 billion.
 
Our Take

We believe MGM Resorts is ideally positioned to take advantage of domestic and international opportunities, and is executing well on its business strategy. However, we remain cautious about the operating environment in Las Vegas. In addition, City Center will likely continue to struggle, given its weightage on high-end non-gaming amenities in a still uncertain economic environment.

We currently have a Zacks #3 Rank on the stock which translates into a short-term Hold rating.

MGM Resorts’ close competitors MGM Resorts International (MGM - Analyst Report) and Wynn Resorts Ltd. (WYNN - Analyst Report) reported their second-quarter 2010 earnings last week. Las Vegas’ earnings of 17 cents were ahead of the Zacks Consensus Estimate of 5 cents. Wynn Resorts also outperformed the Zacks Consensus Estimate at 52 cents.

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