What To Expect From MGM’s Q3 Earnings

MGM Resorts International (NYSE: MGM) will report its Q3 earnings on Wednesday, November 8, and we expect its revenues to grow by nearly 10% 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 Theater. The Mayweather-McGregor fight, which took place in T-Mobile Arena in August, is likely to be the key growth driver this quarter. MGM is expected to continue its strong growth in domestic resorts, but its Macau revenues may decline this quarter. Macau’s gross gaming revenues (GGR) continued to grow strongly this quarter, but MGM’s decision to delay the opening of MGM Cotai may hurt the company’s financials this quarter.

Our $37 price estimate for MGM’s stock is around 20% ahead of the current market price.

Factors Affecting Earnings

1. The Money Fight: The Floyd Mayweather Jr. vs. Conor McGregor fight, also known as The Money Fight, took place in MGM’s T-Mobile Arena on August 26. It is estimated to have generated more than $500 million for MGM in the quarter. As a result, Las Vegas’ casino industry also had a solid quarter, with Las Vegas Strip August revenues increasing by nearly 21%. MGM’s peers in the Vegas area, Las Vegas Sands and Wynn Resorts, did not see substantial growth from the region in the third quarter. Accordingly, we expect MGM to benefit strongly from the event this quarter.
2. MGM National Harbor Opening: MGM National Harbor, which was opened in December 2016, performed exceptionally in the first half of 2017 and already had about a 30% market share in Maryland’s casino industry. Additionally, MGM’s Borgata acquisition continued to perform well in the first half of 2017. 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.
3. Macau Casino Industry Growth: MGM’s Macau operations contribute just 25% to MGM’s overall sales. However, the revenue contribution from the region to MGM’s overall revenues have declined in the past year due to increased competition in the region. Las Vegas Sands and Wynn opened new casinos on the Cotai strip last year, which ate into MGM’s revenue growth despite the industry rebound in Macau. MGM further delayed the opening of MGM Cotai, which may continue to put pressure on MGM’s revenues from the region. Overall, we believe that despite the strong growth of Macau’s GGR this quarter, MGM’s revenues from the region will remain under pressure.

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

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