We upgrade our recommendation on casino-hotel operator
MGM Resorts International
) from Neutral to Outperform based on its better-than-expected
first-quarter 2013 results and strategic initiatives to spur
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MGM RESORTS INT (MGM): Free Stock Analysis
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Why the Upgrade?
Last month, MGM Resorts' first-quarter 2013 adjusted earnings of
3 cents per share breezed past the Zacks Consensus Estimate of a
loss of 10 cents per share as well as the prior-year quarter loss
of 9 cents per share. The bottom line exceeded expectations on
the back of an improved top line. Further, the first-quarter
results mark MGM Resorts' return to profitability.
In the first quarter, total revenue grew 3% year over year to
$2.4 billon, which also beat the Zacks Consensus Estimate of $2.3
billion. Higher revenues from both Las Vegas and China boosted
total revenue in the quarter. Visitation in the Las Vegas market
remains strong ensuring a steady recovery from the damage due to
the recession five years ago.
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 and Western Massachusetts in Maryland. This
geographical diversification protects the company from regional
Apart from expansion, MGM Resorts is strengthening its loyalty
program. This month, it formed a venture with hotelier
Hyatt Hotels Corp.
) to reinvigorate their respective loyalty programs - MGM
Resorts' M life program and Hyatt Gold Passport. Also, MGM's
social gaming site 'myVEGAS.com' in association with Play Studios
is also expected to drive its business. MGM retains a Zacks Rank
Other Stocks to Consider
Some other leisure and gaming industry stocks with a favorable
Zacks Rank include
Monarch Casino & Resort Inc.
Multimedia Games Inc.
), both with a Zacks Rank #1 (Strong Buy).