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MGM (MGM) Up 4.1% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for MGM Resorts (MGM - Free Report) . Shares have added about 4.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is MGM due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

MGM Resorts Q3 Earnings & Revenues Top Estimates

MGM Resorts reported impressive results in third-quarter 2018, wherein both earnings and revenues outpaced the respective Zacks Consensus Estimate. Adjusted earnings of 24 cents trumped the consensus estimate of 18 cents. Including benefits from the sale of Mandarin Oriental Las Vegas, the bottom line came in at 26 cents, flat year over year.

Total revenues of $3,029.3 million came ahead of the consensus mark of $2,911 million and increased 7% year over year. The improvement was backed by higher revenues at MGM China.

Based on improving market scenario, the company seems to be optimistic about its fourth-quarter performance. The upside will be driven by newly opened properties and its efforts to improve margins.

MGM China

MGM China’s net revenues increased 37% year over year to $606 million, courtesy of net revenue contribution of $172 million from recently opened MGM Cotai.

The opening of MGM Cotai facilitated a 43% year-over-year increase in Main floor table game wins. VIP table game wins increased 11% from the prior-year quarter number, primarily driven by an 8% gain from VIP table games win at MGM Macau.

MGM China’s adjusted property EBITDA (earnings before interest, taxes and amortization) increased 7% to $130 million from $121 million in the prior-year quarter. However, adjusted property EBITDA margin came in at 21.5%, marking a decline of 590 basis points (bps) from the year-ago quarter figure. Operating margin was 8.6% in the quarter under review.

Domestic Operations

MGM Resorts owns and operates several properties in Las Vegas. It also owns a number of assets in Mississippi and Michigan.

Net revenues of $2,231.5 million from the company's domestic resorts declined 2% from the prior-year quarter. Excluding MGM Springfield, the metric decreased 3% compared with the figure registered in the year-ago quarter. However, casino revenues inched up 1% owing to opening of MGM Springfield. On a same-store basis, casino revenues declined 3%.

Room revenues were down 5% due to a 3.9% fall in RevPAR (revenue per available room) at the company's Las Vegas Strip resorts. Las Vegas Strip RevPAR declined 3.9% in the reported quarter, with average daily rate (ADR) decreasing 1.9%. Occupancy decreased 200 bps.

Adjusted property EBITDA decreased 12% year over year to $627 million.
Income from Unconsolidated Affiliates – CityCenter HoldingsMGM’s urban complex, CityCenter, operates through two segments — Resort and Residential.

Net revenues from CityCenter were down 6% year over year to $294 million due to a decrease in both casino and non-casino revenues.

Operating income from resort operations summed $28 million in the reported quarter compared with $53 million in the prior-year quarter. Adjusted EBITDA from resort operations totaled $85 million, reflecting a 20% decline year over year.

Balance Sheet

MGM Resorts ended the third quarter with cash and cash equivalents of $1,302.7 million as of Sep 30, 2018, compared with $1,499.9 million as of Dec 31, 2017.

During the reported quarter, the company's board of directors approved a quarterly dividend of 12 cents per share, totaling $63 million. MGM Resorts also repurchased $176 million of shares of its common stock.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -14.5% due to these changes.

VGM Scores

At this time, MGM has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, MGM has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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