A Strong Vegas Business And Recovery In Macau Will Drive MGM’s Q2 Results
MGM Resorts (NYSE:MGM) is expected to publish its Q2 2023 results on August 2, reporting on a quarter that is likely to see stronger business at the company’s Las Vegas properties and a continued recovery in Macau. We expect sales to come in at $3.81 billion, in line with consensus estimates and marking an increase of about 17% versus last year. We expect earnings to come in at about $0.55 per share, slightly ahead of the consensus. See our analysis of MGM Resorts Earnings Preview for a closer look at what to expect when the company publishes earnings.
MGM’s Las Vegas Strip properties should fare well. Tourist inflows into the Las Vegas strip have been improving. For perspective, for the first half of the year, Las Vegas Harry Reid International Airport saw total passenger traffic increase 15.9% year-over-year to 28.1 million. Customers have also been spending more on average at casinos, with average hotel room rates also trending higher. Separately, MGM’s Vegas business will also benefit from the inclusion of the results of The Cosmopolitan, which the company acquired last year.
MGM’s Macau business is also likely to witness a strong rebound after China relaxed its intense Covid-19 restrictions earlier this year. While the mass-market segment in Macau has seen pent-up demand, the VIP segment is also showing signs of picking up. This should help drive growth for this quarter. That being said, Casino companies have been held back to an extent by a severe labor shortage, as many foreign employees working in the hospitality sector in Macau left through the pandemic.
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Now, MGM stock has seen a solid rally this year, rising by close to 50% year-to-date. So is the stock still a buy at current levels of about $50 per share? We currently remain neutral on MGM Resorts stock at about $51 per share. See our analysis of MGM Resorts Valuation: Expensive or Cheap for more details. The stock trades at about 22x projected 2023 earnings, which is not exactly cheap. However, there are a couple of factors that could help the stock. Although MGM’s exposure to Macau is smaller compared to its rivals, the recovery should help the company’s earnings. Moreover, the company is also making progress with its interactive gaming initiatives, with its BetMGM online sports betting expected to turn profitable over the second half of the year.
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| Returns | Jul 2023 MTD [1] |
2023 YTD [1] |
2017-23 Total [2] |
| MGM Return | 16% | 52% | 77% |
| S&P 500 Return | 3% | 19% | 105% |
| Trefis Multi-Strategy Portfolio | 7% | 28% | 310% |
[1] Month-to-date and year-to-date as of 7/30/2023
[2] Cumulative total returns since the end of 2016
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