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MGM Resorts (MGM): A Beat in the Cards in Q3 Earnings?

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We expect MGM Resorts International (MGM - Free Report) to beat expectations when it reports third-quarter 2016 numbers on Nov 7, before the opening bell.

Last quarter, MGM Resorts posted a 23.81% positive earnings surprise. In fact, the company posted positive earnings surprise in three of the last four quarters, with an average beat of 83.15%.

Let’s see how things are shaping up for this announcement.

MGM RESORTS INT Price and EPS Surprise

 

MGM RESORTS INT Price and EPS Surprise | MGM RESORTS INT Quote

Why a Likely Positive Surprise?

Our proven model shows that MGM Resorts is likely to beat on earnings because it has the perfect combination of two key ingredients.

Zacks ESP: Earnings ESP for MGM Resorts is +44.44% because the Most Accurate estimate is pegged at 13 cents while the Zacks Consensus Estimate is at 9 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.  

Zacks Rank: MGM Resorts currently has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of MGM Resorts’ favorable Zacks Rank and positive ESP makes us reasonably confident of an earnings beat.

What is Driving the Better-than-Expected Earnings?

MGM Resorts’ earnings in the to-be-reported quarter are expected to benefit from higher demand at its properties in Las Vegas on the back of improving employment rate trends and increasing tourism numbers in the region. With the Las Vegas Strip recording high occupancy rates, the company has been witnessing a solid rise in resort revenues, which should continue to boost the top line. Moreover, the diversification of its resort portfolio and non-gaming options should propel third-quarter revenues as well. Meanwhile, the company’s profit growth plan is poised to further boost the quarter’s profits.

However, MGM Resorts’ revenues have been hurt by its sluggish performance in Macau over the past few quarters. Nonetheless, per the Macau Gaming Inspection and Coordination Bureau, gross gaming revenues (GGR) for the month of July fell 4.5%, but rose in August and September by 1.1% and 7.4%, respectively, on a year-over-year basis, indicating that the Macau market might be on a recovery path. We thus expect the company’s performance in the region to get a boost in the to-be-reported quarter.

Stocks to Consider

MGM Resorts is not the only company looking up this earnings season. Here are some other companies to consider as our model shows they also have the right combination of elements to post an earnings beat this quarter:

Vail Resorts Inc. (MTN - Free Report) has an Earnings ESP of +4.46% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Marriott International, Inc. (MAR - Free Report) has an Earnings ESP of +1.11% and a Zacks Rank #3.

AMC Entertainment Holdings, Inc. (AMC - Free Report) has an Earnings ESP of +3.57% and a Zacks Rank #3.

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