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 Las Vegas Sands Corp. (LVS - 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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