Why Is MGM (MGM) Down 8.5% Since Last Earnings Report?
A month has gone by since the last earnings report for MGM Resorts (MGM). Shares have lost about 8.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is MGM due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
MGM Resorts Q2 Earnings Miss Estimates, Revenues Top
MGM Resorts reported mixed second-quarter 2022 results, with earnings missing the Zacks Consensus Estimate and revenues beating the same. The top and the bottom line increased on a year-over-year basis. The company's results in the quarter benefited from robust regional operations, courtesy of strong leisure demand and better convention business.
Earnings & Revenue Discussion
MGM Resorts reported adjusted earnings per share of 3 cents, missing the Zacks Consensus Estimate of 24 cents. In the prior-year quarter, the company had reported an adjusted loss of 13 cents per share.
Total revenues were $3,264.9 million, which surpassed the Zacks Consensus Estimate of $3,034 million. The top line soared 44% from $2,268 million reported in the year-ago period. The upside was primarily driven by the rise in Casino, BetMGM, and other sports betting and iGaming revenues.
MGM China
MGM China's net revenues fell 54% year over year to $143 million. The figure is down 79.7% compared to 2019 levels. VIP Table Games turnover declined 74% year over year to $684 million. MGM China casino revenues decreased 55% year over year to $121 million.
MGM China's adjusted property EBITDAR (Earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs) amounted to ($52.1) million against the adjusted property EBITDAR of $8.6 million reported in the prior-year quarter.
Domestic Operations
Net revenues at Las Vegas Strip Resorts during the second quarter were $ 2,137.2 million, up 112.7% year over year. The company benefitted from increased business volume and travel activity on a year-over-year basis. Also, the addition of The Cosmopolitan and Aria added to the upside.
Adjusted property EBITDAR improved a whopping 108% year over year to $825.3 million. Casino revenues in the quarter under review were $499 million, up 41% year over year.
During the quarter under review, net revenues from the company's regional operations totaled $959.7 million, up 12.1% from the prior-year quarter. The upside was primarily driven by strong leisure demand and a return from its convention customers.
Adjusted property EBITDAR was $339.9 million, up 6.8% year over year. Adjusted property EBITDAR margin contracted 180 basis points year over year to 35.4%.
Casino revenues in the quarter under review rose 4% from the year-ago level of $734 million.
Balance Sheet & Share Repurchase
MGM Resorts ended the second quarter with cash and cash equivalents of $5,784.2 million compared with $2,719.1 million reported in the previous quarter. The company's long-term debt at the end of the quarter stood at $7,107.2 million, down from $10,507.1 million as of Mar 31, 2022.
During the second quarter, the company repurchased nearly $32 million shares at an average price of $34.42 per share for $1.1 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -31.43% due to these changes.
VGM Scores
At this time, MGM has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, MGM has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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