Shares of MGM Resorts InternationalMGM were down over 9% in yesterday's trading session after the company posted mixed results for the fourth quarter of 2016, wherein earnings lagged the Zacks Consensus Estimate, while revenues surpassed the same.
Earnings and Revenue Discussion
MGM Resorts posted adjusted earnings of 11 cents per share which came below the Zacks Consensus Estimate of 17 cents by 35.3%. Reported earnings however compared favorably with the year-ago quarter loss of 1 cent.
Total revenue of $2.46 billion beat the Zacks Consensus Estimate of $2.44 billion by nearly 1% and jumped 12.3% year over year. The upside reflects a significant increase in Las Vegas operations primarily driven by the acquisition of The Borgata - Atlantic City's top casino, and slight increase in revenues from MGM China as well.
Notably, the Macau region has been struggling over the past few quarters due to the Chinese government's anti-graft corruption drive, which has lowered footfall at the casinos. However, gaming revenues increased in all the three months of the fourth-quarter, thereby continuing the revival in Macau.
Adjusted property EBITDA (earnings before interest, taxes, and amortization) at MGM Resorts' wholly owned domestic resorts was $493 million, up 14% year over year. The Profit Growth Plan, commenced in Jul 2015 is apparently paying off, reflected by improving profits.
Notably, the company owns approximately 56% of MGM China Holdings Limited, the owner of MGM Macau resort and casino, and is developing a gaming resort in Cotai.
MGM China's net revenue inched up 0.2% year over year to $500 million due to higher revenues from VIP gamblers, somewhat offset by decrease in revenue from main-floor table games.
Main-floor table games revenues dipped 2%, while VIP table games revenues witnessed a 7% rise due to hold percentage increase of 70 basis points (bps) year over year to 3.7%. Meanwhile, VIP table games turnover fell 16% year over year.
MGM China's adjusted EBITDA increased 5% to $158 million.
MGM Resorts owns and operates several properties in Las Vegas. Apart from this, it has a number of assets in Mississippi and Michigan.
Net revenue of $1.8 billion at the company's domestic resorts increased 17% over the prior-year quarter. However, this marks an increase of only 2% on a same-store basis, excluding contributions from Borgata, which it began consolidating in Aug 2016, MGM National Harbor, which opened in Dec 2016, and Circus Circus Reno, which the company sold in 2015. Notably, softness in its Las Vegas convention business somewhat hampered the results.
Nevertheless, casino revenues from wholly owned domestic resorts improved 33% due to the acquisition of Borgata, opening of MGM National Harbor and an increase in both table games and slots revenue.
Same-store table games hold percentage was 22.5%, up 250 bps year over year. Room revenues increased 10%, primarily attributable to a 3% each rise in Las Vegas Strip RevPAR (Revenue per Available Room) and average daily rate.
Operating income at the company's wholly owned domestic resorts increased 1.3% to $318 million.
Income from Unconsolidated Affiliates - CityCenter Holdings
MGM's urban complex, CityCenter (located in Las Vegas, with 50% owned by the company), operates through two segments - Resort and Residential. Under the Resort operations, the company has three properties, namely, Aria, Vdara and Mandarin Oriental.
Net revenue from CityCenter declined 2% year over year to nearly $301 million. Adjusted EBITDA decreased 5% to $91 million due to the decline in entertainment revenue related to the Apr 2016 Zarkana show closure and lower casino revenues.
MGM Resorts International Price, Consensus and EPS Surprise
The company's board of directors announced the initiation of a quarterly dividend of 11 cents per share, payable on Mar 15, 2017, to shareholders of record, as of Mar 10, 2017.
Zacks Rank & Stocks to Consider
MGM Resorts presently has a Zacks Rank #3 (Hold). Better-ranked stocks in the sector include Intrawest Resorts Holdings, Inc. SNOW , Royal Caribbean Cruises Ltd. RCL and Belmond Ltd. BEL . While Intrawest Resorts Holdings sports a Zacks Rank #1 (Strong Buy), Royal Caribbean and Belmond carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
The Zacks Consensus Estimate for Intrawest Resorts Holdings' fiscal 2017 earnings climbed nearly 26% in the past 60 days. Moreover, the trailing four-quarter average earnings surprise is a positive 8.71%.
Royal Caribbean's earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 22.26%. Further, for 2017, EPS is expected to grow a solid 15.46%.
Belmond posted positive earnings surprise in three of the last four quarters, with an average beat of 108.63%. Additionally, for 2016, EPS is expected to improve 66.7%.
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