MGM Resorts Q1 Earnings Preview: Watchout For Non-Gaming Operations Growth

May 3rd, 2016 by Trefis Team
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MGM Resorts (NYSE:MGM) will report its Q1 2016 earnings on May 5th, reporting on a quarter that saw Macau mass gaming stabilize while Las Vegas Strip saw gaming revenues decline in mid-single-digits. Here’s a quick review of what to expect and what we will be watching when MGM publishes its numbers this Thursday.

We currently have a $24 price estimate for MGM Resorts, which is around 10% ahead of the current market price.

See our complete analysis of MGM Resorts | Las Vegas Sands | Wynn Resorts

  • The Macau market saw a 13% decline in gross gaming revenues, as compared to a 27% drop in the prior year quarter and 34% decline for the full year 2015. [1] Mass-market gaming saw a relatively better quarter, declining a mere 5%, as compared to 27% in the prior year period. The better performance of the mass-market should bode well for MGM’s Q1 performance.
  • While the decline in Macau will surely weigh over the company’s overall performance, MGM’s domestic hotel operations will likely boost the earnings. MGM likely saw high single-digit RevPAR (Revenue Per Available Room) growth during the quarter and this will likely boost the company’s overall EBITDA. This can be attributed to the high level of conventions in the mix for MGM. In the previous quarter, the company posted 12% RevPAR growth led by a higher convention mix.  We expect this trajectory to continue in the near term.
  • While the company’s domestic hotel operations will likely perform well, domestic gaming operations may remain muted given the 4% drop in the Las Vegas Strip gaming revenues. [2] This can be attributed to a low-double-digit drop in Baccarat revenues at the Strip. Lower gaming volume at the Strip will likely weigh on MGM’s domestic casino operations.
  • We currently expect MGM’s 2016 full-year revenues to grow 4% and EBITDA to grow 6%. Our EPS estimate of $0.68 for the full year is in line with the $0.68 consensus figure, as per Reuters.
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  4. With A Strong Vegas Business And A Possible Recovery In Macau, What’s Next For MGM Stock?
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Notes:
  1. Monthly Gross Revenue from Games of Fortune, Gaming Inspection & Co-ordination Bureau, Macau, Apr 2016 [↩]
  2. Gaming Revenue Information, Nevada Gaming Control Board [↩]