MGM Resorts Earnings Preview: What to Expect?

by Trefis Team
MGM Resorts International
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MGM Resorts (NYSE: MGM) will report its Q2 earnings on July 27, and we expect its revenues to grow by nearly 20% this quarter. A significant portion of this growth is expected to come from its new openings and acquisitions including MGM National Harbor, T-Mobile Arena and MGM Park Theatre. MGM’s diversified revenue stream spread across the U.S. and Macau will likely boost its growth this quarter. The Macau gaming industry rebounded strongly, and MGM is also likely to benefit from that. MGM’s margins and profits are also expected to increase sharply this quarter as a result of its costs cutting strategy and new openings.

National Harbor, Borgata Acquisition to Boost MGM’s Domestic Businesses

MGM National Harbor, which was opened in December 2016, had a fantastic first quarter and already had about 30% market share in Maryland’s casino industry. The revenues generated from MGM National Harbor were about $175 million in the first quarter, and was about 35% of MGM’s incremental revenues. Additionally, MGM’s Borgata acquisition continued to perform well. These two businesses together contributed nearly 75% of MGM’s incremental revenues in Q1 and we expect that to continue in Q2 as well. Combined with T-Mobile Arena and MGM Park Theater, these businesses further strengthen MGM’s line of domestic resorts and entertainment ventures. MGM is the market leader in the Las Vegas market, and we expect it to continue its growth momentum in the region.

Macau Gaming Industry Rebounds Strongly

Gross gaming revenues (GGR) in Macau were up 22% in Q2’17, primarily due to a rise in VIP gaming in the region after a slowdown in the Macau government’s crackdown. Although the competition intensified in Macau after Wynn and Las Vegas Sands opened their new casinos in the region last year, MGM can still benefit from the industry rebound.

Macau operations contribute less than 30% of MGM’s overall revenues, but given the cost cutting measures the company has undertaken, its profits from the region could grow by double digits this quarter. Additionally, MGM’s margins from its domestic operations may also get a boost from its NV Energy exit plan.

For our model and valuation, see our complete analysis of MGM Resorts International

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