Shares of MGM Resorts International (MGM - Free Report) were up nearly 3% in yesterday’s trading session, after the company reported better-than-expected third-quarter 2016 results.
Earnings and Revenue Discussion
MGM Resorts posted adjusted earnings of 58 cents per share, significantly higher than the Zacks Consensus Estimate of 8 cents. Reported earnings also increased considerably from the year-ago quarter owing to higher revenues.
Meanwhile, total revenue of $2.52 billion beat the Zacks Consensus Estimate of $2.37 billion by around 6% and jumped 10.3% year over year. The upside reflects a significant increase in Las Vegas operations primarily driven by the acquisition of The Borgata – Atlantic City’s top casino, partly offset by the decline in revenues from MGM China. The company owns approximately 56% of MGM China Holdings Limited, the owner of MGM Macau resort and casino, and is developing a gaming resort in Cotai.
Notably, the Macau region has been struggling over the past few quarters due to the Chinese government’s anti-graft corruption drive, which has lowered footfall at the casinos. Though, gross gaming revenues in Macau declined in July, it rose in August and September. However, it was not enough to turn around the company’s operations in the region, this quarter.
MGM China’s net revenue decreased 6% year over year to $500 million due to lower revenues from VIP gamblers, partly offset by increase in revenue from main-floor table games.
Main-floor table games revenues soared 21%, while VIP table games revenues plunged 26% due to a lower VIP table games turnover of 14%. Meanwhile, the hold percentage contracted 70 basis points (bps) year over year to 3.0%.
MGM China’s adjusted EBITDA (earnings before interest, taxes, and amortization) increased 17% to $150 million as a result of an increase in main floor table games and continuous efforts to reduce costs.
MGM Resorts owns and operates several properties in Las Vegas. Apart from this, it has a number of assets in Mississippi and Michigan.
Net revenues of $1.9 billion at the company's domestic resorts increased 16% over the prior-year quarter. This marks an increase of 8% on a same-store basis, excluding contributions from Borgata, which it began consolidating in Aug 2016 and Circus Circus Reno, which the company sold in 2015. Casino revenues from wholly owned domestic resorts improved 23% due to the acquisition of Borgata and an increase in both table games and slots revenue.
Same-store table games hold percentage was 23.7%, up 330 bps year over year. Room revenues climbed 14%, primarily attributable to an 11% rise in Las Vegas Strip RevPAR (Revenue per Available Room) and a 9% increase in average daily rate.
Adjusted property EBITDA at MGM Resorts’ wholly owned domestic resorts was $570 million, up 39% year over year. The Profit Growth Plan, commenced in Jul 2015 is apparently paying off, reflected by improving profits.
MGM RESORTS INT Price, Consensus and EPS Surprise
Income from Unconsolidated Affiliates – CityCenter Holdings
MGM’s urban complex, CityCenter (located in Las Vegas, with 50% owned by the company), operates through two segments – Resort and Residential. Under the Resort operations, the company has three properties, namely, Aria, Vdara and Mandarin Oriental.
Net revenue from CityCenter jumped 11% year over year to nearly $308 million. Adjusted EBITDA soared 41% to $93 million.
Zacks Rank & Stocks to Consider
MGM Resorts presently has a Zacks Rank #3 (Hold).
Better-ranked stocks in the gaming industry include Las Vegas Sands Corp. (LVS - Free Report) , Monarch Casino & Resort Inc. (MCRI - Free Report) and Churchill Downs Inc. (CHDN - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Las Vegas Sands recently reported robust third-quarter results, delivering a positive earnings surprise of 22.03%
Monarch Casino surpassed/met the Zacks Consensus Estimate in three of the trailing four quarters with an average beat of 9.61%.
Churchill Downs’ current year growth estimate is pegged at 55.5% while the gaming industry average growth estimate stands at a negative 3.5%.
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