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MGM Resorts Beats 2Q Earnings, Rev Estimates

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MGM Resorts International’s (MGM - Free Report) second-quarter 2013 adjusted earnings of 4 cents per share comprehensively beat the Zacks Consensus Estimate of a penny as well as the prior-year quarter loss of 12 cents per share. The better-than-expected bottom-line performance can be attributed to an improved top line.

However, on a reported basis, MGM Resorts posted a loss of 19 cents per share compared with a net loss of 30 cents per share in the prior-year quarter.

In the second quarter, total revenue increased 7% year over year to $2.48 billon, which also beat the Zacks Consensus Estimate of $2.40 billion. Higher revenues in both Las Vegas and China boosted the top line. Visitation in the Las Vegas market remains strong ensuring a speedy recovery from the damage due to recession.

Domestic Operations

The company owns and operates several properties, spread across 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 18.1%, higher than the year-ago level of 17.7%. Revenues from slots increased 3% in the quarter mainly driven by continued impressive performances (up 7%) at Las Vegas Strip resorts.

Room revenues increased 5.0%, primarily attributable to a 2.5% rise in RevPAR (revenue per available room) in the Las Vegas Strip properties. A higher average daily rate as well as occupancy led to the rise in RevPAR at these resorts.

Similar to the prior two quarters, MGM’s urban complex CityCenter continued to perform well in the second quarter including residential operations.  Net revenue from CityCenter grew 14.9% year over year to $333.2 million due to better results from the residential division.

However, net revenue from resort operations dipped 1% to $279.7 million mainly due to lower revenues from the Aria property. Aria's table games hold percentage was 20.8% in the quarter versus 24.0% in the prior-year quarter. However, Crystals and Mandarin Oriental put up a good show.

Adjusted EBITDA from CityCenter (including residential operations) improved to $72.7 million from $65.2 million recorded in the prior-year quarter. However, adjusted EBITDA from resort operations declined 6% year over year to $67.0 million, mainly hurt by Aria.

Adjusted property EBITDA of the company's wholly-owned domestic resorts was $376 million, up 9% year over year due to stringent cost control initiative.

MGM China

MGM China’s net revenue was up 18% to $835.0 million due to increases in main floor table games, slots revenues and VIP revenues. Main floor table games and slot wins went up 29% and 4%, respectively. VIP able games turnover increased significantly by 34%.

Adjusted EBITDA grew 10% to $205.0 million due to a higher contribution from the main floor business, which represents more than 50% of EBITDA. This was MGM China’s highest ever quarterly adjusted EBITDA.

Our Take

Carrying on the momentum of the first quarter of 2013, this casino-resort operator put up a strong performance in almost all of its categories in the second quarter of 2013. The first-quarter marked MGM Resorts’ return to profitability and we believe that strong revenue generation in both Las Vegas and China in the second quarter will help it to sustain its turnaround ahead. However, in Las Vegas, performance of Aria was a deterrent in the reported quarter. Also, a higher debt load in its balance sheet acts as a major concern.

MGM Resorts currently retains a Zacks Rank #3 (Hold). Other companies in the casino industry, which are expected to perform well include Monarch Casino & Resort Inc. (MCRI - Free Report) , Boyd Gaming Corp (BYD - Free Report) and Bally Technologies, Inc. . While Monarch holds a Zacks Rank #1 (Strong Buy), Boyd Gaming and Bally Technologies hold a Zacks Rank #2 (Buy).

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