MGM Resorts International’s (MGM) China unit reported record performance for the first quarter of 2013, the company announced this morning before the New York markets opened. But the big surprise in MGM Resorts International’s first quarter earnings report came from Las Vegas. EBITDA (earnings before interest, taxes, depreciation, and amortization) climbed 12% year over year at the company’s U.S. operations to $361 million.
For the quarter MGM reported earnings of $0.01 a share, which beat Wall Street projections of a 10 cents a share loss for the quarter. Revenue (less promotional allowances) climbed 2.8% year over year to $2.35 billion against the $2.34 billion consensus.
MGM Resorts shares were up 6.3% to $14.67 as of 3:30 p.m. New York time.
For MGM, the largest casino operator on the Las Vegas Strip, a return to growth in the domestic market is more than welcome news. Read more
MGM Resorts International (MGM) has passed another milestone on its path to building a new casino on Macau’s fast-developing Cotai strip. On January 9 MGM China Holdings, MGM Resorts International’s joint venture with the daughter of casino giant Stanley Ho, received formal government approval to build what will be its second resort/casino in Macau.
The joint venture will pay a land premium of $162 million to build a 1,600-room hotel, and a casino with 500 tables and 2,500 slot machines in Macau. The resort/casino is scheduled to open in 2017 at a projected construction cost of $2.5 billion.
How much is formal permission to build a casino that won’t open until 2017 worth? Working backward from a projected EBITDA (earnings before interest payments, taxes, depreciation and amortization) of $400 million in 2017, Deutsche Bank calculates that the development adds about $665 million to the equity value of MGM Resorts. (MGM Resorts International is a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ )
But in my analysis the value of the 2017 casino still takes a back seat to improvements in MGM Resorts International’s balance sheet and any recovery in the Las Vegas market that the company dominates. Read more
There are two drivers for shares of MGM Resorts International (MGM)
One of those—the rebound in Las Vegas gaming and hotel revenue—has sputtered recently.
However, the other—refinancing of the company’s big debt load at lower rates and better terms—kicked in with a jolt this week.
Gaming revenue on the Las Vegas Strip, where MGM Resorts is the biggest operator, rose just 3.6% in October, Nevada’s Gaming Control Board reported on Friday, November 30. Following on MGM Resorts third quarter earnings report that showed a 2% drop in the period in REVPAR (revenue per available room) at the company’s Las Vegas properties, it seems that the recovery in Las Vegas from a local recession and a huge oversupply of new rooms has hit a soft spot.
But on December 6 the company announced that it had sold $1.25 billion in 6.625% senior notes due in 2021. The company is looking to raise $4 billion to retire high-interest rate debt. MGM Resorts has $12 billion in debt outstanding, of which $4.9 billion matures before 2016. The average coupon interest rate on that debt is 8%.
Looking at the debt swap, Standard & Poor’s raised the company’s credit rating to B+. Read more
I’d say shares of MGM Resorts International (MGM) climbed on August 7 not on its second quarter earnings announced that morning before the market open in New York, but on the company’s conference call. (MGM is a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/
In the call MGM told investors that the weakness the company saw in its Las Vegas business in May and June looks like just a pocket of weakness rather than the beginning of a downward trend. The company had already seen business improve in July. Bookings for future stays and for conventions had picked back up too after a soft May-June with convention space about 50% booked for 2013. (It’s something of a headwind for the stock that the company’s convention business set a record in the third quarter of 2011.)
For the quarter MGM Resorts reported a loss of 12 cents a share (after non-recurring items) against a consensus Wall Street estimate of a 14 cents a share loss. Revenue climbed 28.7% from the second quarter of 2011 to $2.32 billion. The Wall Street estimate was $2.35 billion. Most of the increase in revenue (and the 33% increase in EBITDA (earnings before interest, taxes, depreciation and amortization)) came from a change in accounting so that results from MGM China are now included in the company’s consolidated reporting.
The quarter represented something of a stall in the recovery of the company’s Las Vegas business. Read more
Before the market open in New York yesterday, MGM Resorts International (MGM) reported a loss of 44 cents a share for the first quarter of 2012. That was much wider than the 15 cents a share loss projected by Wall Street analysts. So it’s not especially surprising that the stock fell down 4.65% yesterday. MGM shares are down another 3.8% today as of 11:30 a.m. New York time on the general decline in U.S. stocks after disappointing April jobs numbers.
On March 20 I wrote a post http://jubakpicks.com/2012/03/20/mgm-resorts-international-mgm-one-for-the-watch-list/ arguing that you should put MGM Resorts on your watch list with a buying target of $13.30 or lower. (That post has more details on the company’s improving debt position.) Well, today the shares are trading at $12.43. That’s sure below $13.30 so as of May 4 I’m buying MGM Resorts International for my Jubak’s Picks portfolio.
Why buy a stock after it misses quarterly earnings estimates? Read more