MGM Resorts (MGM) Beats Earnings, Misses Revenues In Q2

MGM Resorts International (NYSE:MGM) posted mixed results for the second quarter of 2016, wherein its earnings outperformed the Zacks Consensus Estimate while revenues missed the same.

MGM Resorts’ shares were up over 1% in yesterday’s trading session on solid bottom-line performance.

Earnings and Revenue Discussion

MGM Resorts posted earnings of 26 cents per share which beat the Zacks Consensus Estimate of 21 cents by 23.8%. Reported earnings also increased 52.9% from the year-ago quarter.

On the other hand, total revenue of $2.27 billion missed the Zacks Consensus Estimate of $2.36 billion by 3.9% and declined 4.8% year over year. The downside reflects a significant decline in revenues from MGM China. The company owns 51% of MGM China Holdings Limited, the owner of MGM Macau resort and casino, and is developing a gaming resort in Cotai.

Gambling revenues in Macau were sluggish in the quarter as high-stake gamblers have been reducing their spending amid the ongoing economic weakness in China. The region has also struggled due to the Chinese government’s anti-graft corruption drive, which has reduced footfall at the casinos. Also, credit growth concerns, tighter restrictions on visas and a partial smoking ban in casinos have impacted revenues in the region.

Gross gaming revenues in Macau declined throughout the quarter.

Adjusted property EBITDA at MGM Resorts’ wholly owned domestic resorts was $515 million, up 12% year over year. The Profit Growth Plan that commenced in Jul 2015 is apparently paying off, reflected by improving profits.

MGM China

MGM China net revenue plunged 19% year over year to $452 million due to lower revenues from both VIP gamblers and main-floor table games.

Main-floor table games revenues dropped 3%, while VIP table games revenues plunged 33% due to a lower VIP table games turnover of 28%. Meanwhile, the hold percentage contracted 10 basis points (bps) year over year to 3.1%.

MGM China’s adjusted EBITDA dropped 10% to $119 million due to weak sales.

Domestic Operations

MGM Resorts owns and operates several properties in Las Vegas. Apart from this, it has a number of assets in Mississippi and Michigan.

Net revenue at wholly owned domestic resorts decreased 1%. However, excluding Circus Circus Reno, Railroad Pass, and the company's properties in Jean Nevada that were sold in 2015, revenues grew 1%. Casino revenues from wholly owned domestic resorts improved nearly 1% due to higher table games revenues.

Table games hold percentage was 24.2%, up 280 bps year over year. Room revenues climbed 2%, primarily attributable to a 3% rise in Las Vegas Strip RevPAR and a 4% increase in average daily rate.

Operating income at the company's wholly owned domestic resorts surged 16%.

Income from Unconsolidated Affiliates – CityCenter Holdings

MGM’s urban complex, CityCenter (located in Las Vegas, with 50% owned by the company), operates through two segments – Resort and Residential. Under the Resort operations, the company has three properties, namely, Aria, Vdara and Mandarin Oriental.

Net revenue from CityCenter declined 5.4% year over year to nearly $289 million. Adjusted EBITDA inched up 3.6% to $77.1 million.

Zacks Rank & Stocks to Consider

MGM Resorts presently has a Zacks Rank #3 (Hold). Better-ranked stocks in the gaming industry include Isle of Capri Casinos, Inc. (NASDAQ:ISLE) , Monarch Casino & Resort Inc. (NASDAQ:MCRI) and Churchill Downs Inc. (NASDAQ:CHDN) . All the three stocks sport a Zacks Rank #1 (Strong Buy).

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