MGM Meets Zacks Estimates

MGM Resorts International’s ( MGM - Analyst Report ) fourth quarter 2012 adjusted loss of 23 cents per share is in line with the Zacks Consensus Estimate. However, loss per share was wider than the prior-year quarter’s loss of 21 cents per share.

However, on a reported basis, MGM Resorts posted a net loss of $2.50 per share compared with a net loss of 23 cents per share in the prior-year quarter. In full year of 2012, earnings per share were $3.62 versus a loss of $5.62 per share recorded in 2011.

In fourth quarter, total revenues remained nearly flat year over year to $2.3 billon and in line with the Zacks Consensus Estimate. Total revenue reflected growth in the revenues of MGM China.

Inside the Headline Numbers

MGM China’s net revenues were up 2.0% annually to $731.0 million, on the back of a 13% and 37% rise in volume of table games as well as slots, respectively.

Net revenues related to wholly-owned domestic resorts fell 0.7% to nearly $1.5 billion. Similar to the prior quarter, CityCenter continued to perform better in the fourth quarter as well with net revenues from resort operations growing 2.6% year over year to $272.0 million.

Consolidated casino revenues grew 1%, driven by a 1% rise at the company's wholly-owned domestic resorts. The overall table games percentage at casinos of wholly-owned domestic resorts was 21.9%, higher than the year-ago level of 22.8%. Revenues from slots inched up 2% in the quarter.

Room revenues increased 2.0%, primarily attributable to a 1.0% rise in RevPAR (revenue per available room) in the Las Vegas Strip properties. A slightly higher average daily rate led to the rise in RevPAR at these resorts.

Wholly-owned domestic resorts’ operating income in the quarter was $202.0 million, up 8% year over year. MGM Resorts reported total operating loss of $424.9 million compared with an operating income of $91.1 million in the year-ago quarter.

Liquidity

At quarter end, MGM Resorts’ total cash balance was $1.5 billion. Long-term debt outstanding was $13.6 billion.

Dividend

Recently the company’s subsidiary MGM China declared a special dividend worth $500 million that is scheduled to be paid to shareholders of record as of March 11, 2013.

Our Take

Given its strong brand name, we believe that MGM Resorts is better positioned to command a premium rate relative to the overall gaming and lodging industry. The company’s properties are well-diversified within the U.S. as well as outside the U.S.

MGM’s strong revenue generation at MGM China and an improving trend at CityCenter are impressive. The company’s convention bookings for 2013 and 2014 appear strong.

Although MGM Resorts drives a solid share of its total revenue from Macau, the company has begun experiencing a slowdown in that region, owing to a weakening Chinese economy.

MGM Resorts currently retains a Zacks Rank #2 (Buy). Moving ahead, other companies in the industry, which are expected to perform well, include Melco Crown Entertainment Limited ( MPEL - Snapshot Report ) , Boyd Gaming Corp. ( BYD - Snapshot Report ) and Bally Technologies, Inc. ( BYI - Snapshot Report ) . All these stocks carry a Zacks Rank #2 (Buy).