MGM Resorts Earnings Preview: Macau Rebound, Domestic Resorts To Drive Growth

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MGM Resorts (NYSE: MGM) will report its Q1 earnings on April 27, and we expect its revenues to grow in the mid-teens for the quarter. A significant portion of this growth is expected to come from MGM’s newly opened MGM National Harbor property in the Washington D.C. area, which generated nearly $50 million in revenues in its first 20 days of operation. In addition, MGM’s entertainment facilities such as Park Theater and T-Mobile Arena will also aid its growth. The Borgata acquisition, which was completed in the third quarter of 2016, will have an incremental impact of nearly 8% on the company’s top line. Also, MGM is likely to benefit from the rebound in the Macau gaming industry, and stability in the Las Vegas strip area. However, MGM’s Macau growth is likely to remain below its peers in the region as MGM’s Cotai project was delayed until the second half of 2017, and its peers may attract bigger crowds due to their new casinos in the region.

New Openings In Las Vegas To Further Strengthen MGM’s Domestic Businesses

Las Vegas and other domestic U.S. casinos have been the pillars of strength for MGM during the downturn in the global casino industry. Between 2015 and 2016, MGM’s revenue contribution from domestic resorts increased by nearly 15 percentage points. MGM continues to expand into domestic resorts, with the latest example being MGM National Harbor in Maryland. MGM National Harbor opened in December 2016 and has averaged over 22,000 visitors daily. The property has a market share of about 30% in Maryland based on January and February data. We expect it to contribute nearly $200 million in revenue this quarter. In addition to this, MGM also added T-Mobile Arena and MGM Park Theatre recently to increase its domestic presence. MGM has signed well-known artists such as Bruno Mars, Ricky Martin, and Cher who will perform at MGM Park Theater this year. Overall, we expect the newly added casino and entertainment facilities to boost MGM’s profits and revenues in Q1’17.

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NV Energy Exit and Borgata Acquisition Likely To Boost MGM’s Margins

Last quarter, MGM posted a $139 million expense from its NV Energy Exit plan, whereby it has withdrawn from its Nevada utility supply agreement to purchase power on the open market. MGM now has the opportunity for more competitive pricing and complete energy independence, which is likely to boost company’s margins from Q1’17 onwards. Additionally, the Borgata Acquisition, which generated about $350 million in revenues in Q4’16, is likely to continue its solid performance and may contribute close to 15% of MGM’s domestic revenues this quarter.

For our model and valuation, please refer to our complete analysis of MGM Resorts International

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