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Why Is MGM (MGM) Down 5.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for MGM Resorts (MGM - Free Report) . Shares have lost about 5.4% 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 the most recent earnings report in order to get a better handle on the important drivers.

MGM Resorts’ Q2 Earnings & Revenues Miss Estimates

MGM Resorts reported second-quarter 2019 results, wherein earnings and revenues lagged the Zacks Consensus Estimate.

Adjusted earnings of 23 cents per share missed the consensus estimate of 25 cents and also declined 11.5% from that registered in the prior-year quarter.

Total revenues were $3,223.2 million, missing the consensus mark of $3,235 million but increased 13% year over year. This improvement was backed by robust performance of MGM China.

MGM China

MGM China’s net revenues increased 26% year over year to $706 million, owing to net revenue contribution of $316 million from MGM Cotai.

The opening of MGM Cotai facilitated a 36% year-over-year increase in Main floor table game wins. VIP table game wins increased 22% 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 43% to $171 million from $120 million in the prior-year quarter. Moreover, adjusted property EBITDA margin was at 24.2%, marking an increase of 280 basis points (bps) from the year-ago quarter figure.

Domestic Operations

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

Net revenues at Las Vegas Strip Resorts were $1.5 billion, up 1% year over year. Meanwhile, adjusted property EBITDA decreased 4% year over year while EBITDA margin contracted 145 bps. This decline was primarily due to weaker performance at casino.

Net revenues of $911 million from the company's regional operations increased 29% from the prior-year quarter number, driven by revenues of $76 million from MGM Springfield and $55 million from Empire City Casino and net revenues of $68 million from MGM Northfield Park's operations. Adjusted property EBITDA was $255 million, mirroring a 34% increase from the year-ago quarter. Adjusted Property EBITDA margin expanded 122 bps year over year.

Casino revenues in the quarter under review decreased 12% year over year at the company's Las Vegas Strip Resorts due to a 22% decline in table game wins. However, the same increased 35% at the company's Regional Operations, owing to the opening of MGM Springfield, the acquisition of Empire City Casino and the merger of MGM Northfield Park's operations.

At the Las Vegas Strip Resorts, food and beverage revenues rose 8%, backed by the opening of new outlets at Park MGM as well as NoMad Las Vegas. The same increased 18% at Regional Operations, favored by the opening of MGM Springfield and the acquisition of Empire City Casino and MGM Northfield Park's operations.

Balance Sheet

MGM Resorts ended the second quarter with cash and cash equivalents of $1,160.6 million as of Jun 30, 2019, compared with $1,526.8 million as of Dec 31, 2018.

During the reported quarter, the company's board of directors approved a quarterly dividend of 13 cents per share, totaling $68 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted -6.49% due to these changes.

VGM Scores

At this time, MGM has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 trending upward for the stock, and the magnitude of this revision looks promising. 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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