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MGM (MGM) Up 2.1% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for MGM Resorts (MGM - Free Report) . Shares have added about 2.1% in that time frame, underperforming 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' Q1 Earnings & Revenues Miss Estimates

MGM Resorts  reported first-quarter 2020 results, wherein both earnings and revenues missed the Zacks Consensus Estimate. While the top line missed the consensus mark for the fourth consecutive quarter, the bottom line lagged the same for the second straight quarter. Following the results, the company’s shares declined 3.7% in after-hour trading session.

Earnings & Revenues Discussion

MGM Resorts reported adjusted loss per share of 45 cents, wider than the Zacks Consensus Estimate of a loss of 8 cents. In the prior-year quarter, the company had reported adjusted earnings per share of 14 cents. 

Total revenues were $2,252.8 million, which missed the Zacks Consensus Estimate of $2,543 million. Moreover, the top line declined 29% year over year. The downside can primarily be attributed to the temporary shutdown of the company’s domestic and Macau casino operations. Moreover, travel restrictions also impacted the company’s performance in the quarter under review.

MGM China

MGM China’s net revenues declined 63% year over year to $272 million, owing to the coronavirus pandemic. VIP Table Games Hold adjusted MGM China net revenues plunged 61% year over year to $275 million.

MGM China’s adjusted property EBITDAR (Earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs) loss came in at $22 million. In the prior-year quarter, the company had reported adjusted property EBITDAR of $193 million.

Domestic Operations

Net revenues at Las Vegas Strip Resorts during the first quarter were $1,133.8 million, down 21% year over year. Moreover, adjusted property EBITDAR declined 34% year over year and EBITDA margin contracted 466 bps compared with the prior-year quarter.

During quarter under review, net revenues from the company's regional operations amounted to $726 million, down 10% from the prior-year quarter. Adjusted property EBITDAR came in at $152 million, declining 28% from the year-ago quarter. However, adjusted property EBITDAR margin declined 544 bps to 20.9% year over year.

Casino revenues in the quarter under review fell 15% year over year at the company's Las Vegas Strip Resorts primarily due to dismal performance in the month of March, which offset an increase of 12% in casino revenues in first two months of the quarter. Moreover, slots handle declined 19%. Notably, slots handle decreased 8% at its Regional Operations.

Balance Sheet

MGM Resorts ended the first quarter with cash and cash equivalents of $6,016.4 million as of Mar 31, 2020 compared with $2,329.6 million on Dec 31, 2019. The company’s long-term debt at the end of quarter stands at $11,743 .3 million, compared with $11,168.9 million as of Dec 31, 2019.

In an effort to maintain sufficient liquidity, the company has cut dividend and decreased non-essential spending. It has also amended credit agreement and raised 750 million in new bonds.

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 -216.36% due to these changes.

VGM Scores

Currently, MGM has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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. It's no surprise MGM has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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