Key Takeaways From MGM Resorts Q4
MGM Resorts International (NASDAQ: MGM) announced its Q4 earnings on February 20, comfortably beating revenue estimates while missing on earnings. The company reported revenue of nearly $2.6 billion (+6% y-o-y) and its diluted GAAP earnings rose sharply from profit of 4 cents to a profit of $2.42, primarily due to a $1.4 billion tax benefit related to the recent U.S. tax reform. Strong performances in both Las Vegas and Macau casino-resorts propelled Q4 earnings.
Our price estimate of $37 for MGM Resorts is slightly higher than the current market price. We have also created an interactive dashboard where you can change the company’s expected revenue, margins, and other key drivers to gauge how they would impact expected earnings for the year.
Improvement In Vegas And Robust Macau Set To Drive Top Line
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Casino revenue accounts for nearly 56% of MGM’s revenue and continued to see strong momentum in its top line throughout the year. Revenue from the casino business grew 12% y-o-y to $1.53 billion in Q4’17, primarily due to improvements in the domestic and Macau markets, partially offset by the mass shooting in the Mandalay Bay casino-resort. For 2018, MGM remains optimistic about the demand for its resorts both in the domestic and Macau market. MGM looks to further strengthen its position in the domestic market with two new launches – MGM Springfield in the third quarter and Park MGM and NoMad by the end of the year. We expect the positive outlook for MGM to continue into 2018 driven primarily by the healthy environment in Macau, Singapore, and a recovery in the Vegas market. In addition, we also expect a strong long-term growth opportunity for MGM in Macau, with the opening of MGM COTAI earlier this month. MGM’s CEO Jim Murren is quite optimistic about the legalization of sports gambling as well, and we expect this to boost its domestic operations.