We maintain our long-term Outperform recommendation on
MGM Resorts International
. We are optimistic on the company's strong brand value,
continued turnaround in its business, international expansion and
various domestic ventures.
Why the Reiteration?
We see the company's strong brand image as one of its key growth
drivers. It is one of the most sought-after casino-resort
operators along with
Las Vegas Sands Corp.
Wynn Resorts Ltd.
) and has operations both in the U.S. and Macau.
We also remain enthusiastic about MGM Resorts' return to
profitability since the first quarter of 2013. Carrying on the
momentum of the first quarter of 2013, this casino-resort
operator put up a strong performance in almost all of its
categories in the second quarter of 2013.
MGM Resorts' adjusted earnings of 4 cents per share in second
quarter 2013 beat the Zacks Consensus Estimate of a penny and the
prior-year quarter loss of 12 cents per share. The
better-than-expected bottom-line performance can be attributed to
an improved top line. Improving business in both Las Vegas and
China will help it sustain this turnaround. Visitation in the Las
Vegas market remains strong, ensuring a steady recovery from the
damage caused due to the recession and we expect MGM Resorts to
capitalize the potential in full.
The company's convention bookings for the rest of 2013 appear to
be strong, implying an improvement in room revenues across the
board. Looking forward to the third quarter, management expects a
strong convention calendar and solid retail bookings to increase
RevPAR by 3%, higher than the first two quarters of 2013.
MGM Resorts is well-poised to benefit from international and
domestic expansion. It is progressing well with its casino-hotel
development project in Cotai in Macau and seeks to expand further
in Asia. In the domestic arena, it is expected to come up with an
outdoor retail and restaurant park in Las Vegas.
The company is also considering expansion opportunities in some
major locations like Toronto, Canada and Western Massachusetts,
Md. This geographical diversification protects the company from
regional downturns. Further, the legalization of online gambling
in some U.S. states is likely to benefit MGM over the longer
MGM currently has a Zacks Rank #2 (Buy). Another player in the
casino industry, which looks equally attractive at current
Monarch Casino & Resort Inc.
) with a Zacks Rank #2.
LAS VEGAS SANDS (LVS): Free Stock Analysis
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MGM RESORTS INT (MGM): Free Stock Analysis
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