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MGM Resorts International’s (MGM - Analyst Report) first-quarter 2013 adjusted earnings of 3 cents per share comprehensively beat the Zacks Consensus Estimate of a loss of 10 cents per share as well as the prior-year quarter’s loss of 9 cents per share. The better-than-expected bottom-line performance can be attributed to an improved top line. Further, the first-quarter result marks MGM Resorts’ return to profitability.

However, on a reported basis, MGM Resorts posted earnings of 1 cent per share compared with a net loss of 44 cents per share in the prior-year quarter.

In the first quarter, total revenue grew 3% year over year to $2.4 billon, which also beat the Zacks Consensus Estimate of $2.3 billion. Higher revenues in both Las Vegas market and China boosted total revenue in the quarter. Visitation in Las Vegas market remains strong ensuring a speedy recovery from the damage due to the recession five years ago.

Domestic Operations

The company owns and operates several properties located in Nevada, Mississippi and Michigan. Casino revenues related to wholly-owned domestic resorts grew 3%. The overall table games percentage at casinos of wholly-owned domestic resorts was 21.9%, higher than the year-ago level of 18.7%. Revenues from slots declined 2% in the quarter. The decrease was due to lower slots revenues at the company's regional resorts, which overshadowed the 4% increase in the company's Las Vegas Strip resorts slots revenues.

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.

Similar to the prior two quarters, CityCenter continued to perform well in the first quarter with net revenue from resort operations growing 32.0% year over year to $308.0 million. Adjusted EBITDA from resort operations skyrocketed to $93 million from $32 million recorded in the prior-year quarter.

Consolidated operating income for the wholly-owned domestic resorts surged 20% to $234.0 million in the first quarter due to stringent cost control initiative.

MGM China

MGM China’s net revenue was up 6.0% to $748.0 million due to increases in main floor table games and slots revenues. Main floor table games and slots win increased 26% and 19%, respectively.

Adjusted EBITDA grew 10% due to a higher contribution from the main floor business, which represents around 65% of EBITDA.


At the end of Mar 31, 2013, cash and cash equivalents stood at $1.48 billion versus $1.54 billion at the end of Dec 31, 2012. Long-term debt was $13.69 billion as opposed to $13.59 billion at the end of Dec 31, 2012.

Our Take

We remain enthusiastic about MGM Resorts' turnaround in the quarter in terms of profitability. Strong revenue generation at MGM China and an improving trend at Las Vegas are impressive. The company’s convention bookings for 2013 and 2014 appear strong.  However, higher debt in its balance sheet acts as a major deterrent.

MGM Resorts currently retains a Zacks Rank #2 (Buy). Other companies in the industry, which are expected to perform well, include Wynn Resorts Ltd. (WYNN - Analyst Report), Las Vegas Sands Corp. (LVS - Analyst Report) and Bally Technologies, Inc. (BYI - Snapshot Report). All these stocks carry a Zacks Rank #2 (Buy).

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