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MGM Posts Mixed 2Q

Zacks Equity Research

MGM Resorts International’s (MGM) second quarter 2012 adjusted loss of 12 cents per share improved from the Zacks Consensus Estimate of a loss of 14 cents per share. However, loss per share was wider than the prior-year quarter’s loss of 5 cents per share.

However, on a GAAP basis, MGM Resorts posted net loss of 30 cents per share compared with net earnings of $6.22 per share in the prior-year quarter.

Total revenue jumped 28.2% year over year to $2.32 billion but fell short of the Zacks Consensus Estimate of $2.35 billion. MGM China generated net revenues of $709.0 million, up 6.0% year over year. Year-over-year increases in the main floor table games and slots were recorded in MGM China.

CityCenter performed better in the second quarter, with net revenue from resort operations growing 3.0% year over year to $282.0 million.

Inside the Headline Numbers

Casino revenue related to wholly-owned domestic resorts dipped 1% year over year because of a lower table games hold percentage. The overall table games hold, as a percentage of turnover, was 17.7%, lower than the year-ago level of 18.2%. Revenues from slots were flat in the quarter.

Room revenue grew 3.0% primarily attributable to a 5.0% increment in RevPAR (revenue per available room) in the Las Vegas Strip.

Operating income for the wholly-owned domestic resorts in the second quarter of 2012 was $214.0 million, up 10% year over year. MGM Resorts reported a total operating income of $175.4 million compared with $3.68 billion in the year-ago quarter.


At quarter end, MGM Resorts’ total cash balance was $1.73 billion. Long-term debt outstanding was $13.2 billion.

Our Take

We believe that MGM Resorts is ideally positioned to take advantage of both domestic and international opportunities, and is executing well on its business strategy. With no new supply in the Las Vegas market, moderate pickup in visitation will augur well for the company in the domestic arena. The company’s convention bookings for 2013 appear strong. MGM also remains hopeful about its progress in China.

However, a huge portion of debt in its balance sheet remains a cause of concern. Furthermore, slowdown in consumer discretionary spending in the U.S. will likely lead to a muted RevPAR growth in the upcoming quarter.

The company which competes with Las Vegas Sands Corp. (LVS) currently holds a Zacks #3 Rank (short-term Hold rating). Our long-term recommendation remains Neutral.

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