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MGM (MGM) Down 3.4% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for MGM Resorts (MGM - Free Report) . Shares have lost about 3.4% in that time frame, underperforming the S&P 500.

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

MGM Resorts Q4 Earnings & Revenues Beat Estimates

MGM Resorts reported impressive results in fourth-quarter 2018, wherein earnings and revenues outpaced the respective Zacks Consensus Estimate. Adjusted earnings of 14 cents surpassed the consensus estimate of 13 cents. Earnings also compared favorably with the year-ago quarter’s break-even profit.

Total revenues of $3,052.9 million outpaced the consensus mark of $2,954 million and increased 17.5% year over year. The improvement was backed by higher revenues at both gaming and non-gaming facilities.

MGM China

MGM China’s net revenues increased 33% year over year to $687 million, courtesy of net revenue contribution of $287 million from MGM Cotai.

The opening of MGM Cotai facilitated a 31% year-over-year increase in Main floor table game wins. VIP table game wins increased 18% from the prior-year quarter, primarily driven by the opening of VIP junket rooms in September 2018 at MGM Cotai.

MGM China’s adjusted property EBITDA (earnings before interest, taxes and amortization) increased 11% to $167 million from $150 million in the prior-year quarter. However, adjusted property EBITDA margin came in at 24.3%, marking a decline of 480 basis points (bps) from the year-ago quarter. Operating margin was 9% 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 at Las Vegas Strip Resorts increased 6% year over year to $1.4 billion. Revenue per available room (RevPAR) in the reported quarter increased 8.2% from the prior-year quarter. Adjusted property EBITDA increased 15% year over year while EBITDA margin expanded 51 bps.

Net revenues of $782 million from the company's regional operations increased 18% from the prior-year quarter, driven by the opening of MGM Springfield. Adjusted property EBITDA came in at $195 million, marking a 32% increase from the year-ago quarter. Adjusted Property EBITDA margin expanded 277 bps year over year.

Casino revenues for the fourth quarter decreased 3% year over year at the company's Las Vegas Strip Resorts partially due to lower table games hold. The same increased 20% at the company's Regional Operations, owing to the opening of MGM Springfield, and increase in slot and table game wins at MGM National Harbor.

Food and beverage revenues increased 11% at the Las Vegas Strip Resorts, owing to an increase in catering and banquet revenues, and the opening of outlets at Park MGM. Food and beverage revenues increased 17% at Regional Operations, favored by the opening of MGM Springfield.

Balance Sheet

MGM Resorts ended the fourth quarter with cash and cash equivalents of $1,526.8 million as of Dec 31, 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 13 cents per share, totaling $70 million. MGM Resorts also repurchased $6 million worth shares of its common stock.

2018 Highlights

Net revenues in 2018 were $11.8 billion, marking a 9% increase over 2017. Operating income was $1.5 billion compared with $1.7 billion in the prior year.

Las Vegas Strip Resorts’ revenues were $5.7 billion, flat year over year. Operating income was $1.2 billion at Las Vegas Strip Resorts, which was affected by disruption related to repositioning and rebranding of Park MGM.

Net Revenues at regional operations increased 8% to $2.9 billion, owing to contributions from the opening of MGM Springfield. Operating income was $518 million in 2018 compared with $517 million in the prior year.

MGM China witnessed net revenue growth of 4% year over year while operating income declined to $191 million from $204 million in the prior year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -35.26% due to these changes.

VGM Scores

Currently, MGM has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, 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 B. 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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