MGM Resorts International (NYSE: MGM) is unlikely to deliver second-quarter outperformance when it reports results July 25, according to Morgan Stanley.
MGM faced challenges in the second quarter, and some of these headwinds are likely to continue, Allen said in a Thursday downgrade note. (See his track record here.)
The company reported higher-than-expected earnings for the past three quarters — but MGM's Las Vegas, Macau and U.S. regional properties seem to have underperformed expectations in the second quarter, the analyst said.
At the casino operator's Las Vegas properties, which account for around 50% of reported EBITDAR, baccarat revenue fell 55% in May and is tracking down 17% year-to-date, he said.
Channel checks suggest that results from MGM properties in Macau, which contribute about 20% of reported EBITDAR, are likely to have been impacted by low hold and the slow ramp of MGM Cotai, Allen said.
The performance of U.S. regional properties, which account for around 30% of reported EBITDAR, is likely to have been affected by MGM Springfield’s slower ramp and softer-than-estimated revenue from the Empire City and Northfield Park properties, the analyst said.
“While some of the 2Q issues are transitory, we are concerned that weaker Vegas baccarat trends and lower returns on new properties will continue."
MGM shares were down 0.17% at $28.81 at the time of publication Thursday.
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