Back to top

Factors Setting the Tone for MGM Resorts (MGM) Q2 Earnings

Read MoreHide Full Article

MGM Resorts International (MGM - Free Report) is scheduled to report second-quarter 2018 results on Aug 2, before market open. In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 9.7%.

What to Expect?

The Zacks Consensus Estimate for the quarter under review is pegged at 26 cents, which is lower than 31 cents in the year-ago quarter. Moreover, the consensus mark has witnessed downward revision of 1 cent over the past 30 days. The Zacks Consensus Estimate for revenues stands at $2,988 million, up 13.1% from the prior-year actual figure.

Let’s take a look at how the company’s top and bottom line will shape up in the to-be-reported quarter.

Factors at Play

MGM Resorts’ top line in the second quarter is likely to be driven by an increase in revenues from both domestic and China operations. Per the Zacks Consensus Estimate, revenues from domestic resorts are likely to increase 2.4% year over year to $2,120 million. The same for revenues from China operations is currently pegged at $700 million, up 55.9% on a year-over-year basis.

Meanwhile, the company’s strong business model and extensive non-gaming revenue opportunities will continue boosting its performance in the to-be-reported quarter. MGM Resorts’ maximization of digital technology is an added positive. In fact, over the past few years, it has taken various initiatives to align every recognized brand into one global entertainment brand. This, in turn, resulted in a disciplined business model with a unified view of strategy.

Although revenues from China operation is likely to increase in the soon-to-be reported quarter, disappointing gambling revenues from the Macau region in May and June has negatively impacted most of the gaming stocks. Notably, gambling revenues were up for the 23rd straight months in June but still remains below the highest level achieved in 2012. According to analysts, casino traffic in Macau declined in May and June due to increased interest in the FIFA World Cup.

On the earnings front, MGM Resorts is likely to witness a sharp decline in the second quarter due to higher labor costs and expenses associated with technological initiatives. These costs are also likely to put pressure on its margins in the to-be-reported quarter. Higher costs associated with Monte Carlo construction might weigh on the company’s margins as well.

MGM Resorts International Price, Consensus and EPS Surprise


What Does the Zacks Model Say?

Our proven model does not conclusively show that MGM Resorts is likely to beat earnings estimates in the second quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

MGM Resorts has an Earnings ESP of -23.91% and a Zacks Rank #4 (Sell), which makes surprise prediction difficult.

Stocks to Consider

Here are a few other stocks from the same sector that are poised for an earnings beat this quarter.

Caesars Entertainment Corporation (CZR - Free Report) has an Earnings ESP of +33.33% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Red Rock Resorts, Inc. (RRR - Free Report) has an Earnings ESP of +4.00% and a Zacks Rank of 2.

Hilton Grand Vacations Inc. (HGV - Free Report) has an Earnings ESP of +11.36% and a Zacks Rank #2.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>

More from Zacks Analyst Blog

You May Like