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MGM Resorts International Message Board

  • investora2z investora2z Nov 16, 2013 6:48 AM Flag

    Has recovered

    The earnings were below estimates as the company reported an EPS of ($0.07) compared to estimates of ($0.03). The stock has recovered from the correction, though the volumes have not been great. Revenue for the quarter, however, came in better at $2.5 billion (a 9.4% growth on a yoy basis) against the consensus estimate of $2.42 billion. Even the net loss declined significantly on a yoy basis and a sequential basis. EBITDA reported good growth and the margins increased mainly due to strength at MGM China and Las Vegas Strip properties. The management was pleased with the gains in the market share due to its programs & offerings and its focus on international marketing strategies. Most importantly, the management expects reduction in the cash interest expense by $220 million. It is also pursuing refinancing options to further reduce the interest burden. FBR Capital Markets initiated coverage on the stock recently with an Outperform rating and a price target of $25. The analysts stated that while there was disappointment around recent earnings, they see some positives. The strip EBITDA totaled just 60% of the peak which leaves scope for growth, and the company is positioned to benefit from the ongoing growth in Macau. In addition, the strip recovery, dividends from MGM China Holdings, and refinancing efforts should lead to better margins and improvements in the balance sheet. Further, MGM is in the going for licenses in Massachusetts and Maryland which may help it in future growth. Other players are also exploring emerging segments. Caesars (CZR), and more recently, MGT Capital Investments (MGT) has acquired companies in the social casino sector which holds a lot of potential. The improvements in performance of MGM are encouraging. However, a few more good quarters are required to confirm the positive trend in improvement of bottomline. The ttm loss is still huge and stands at $1.34 billion on a revenue of $9.23 billion.

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