MGM Resorts’ 3Q results beat analysts’ expectations
MGM Resorts International on Tuesday reported better third-quarter results than Wall Street analysts expected and the company had projected.
Despite higher expenses resulting from the August opening of MGM Springfield and a tough comparison against a robust third quarter in 2017 that featured two major boxing events, the Las Vegas-based casino company reported a 7 percent increase in revenue to nearly $3.03 billion, but a 2.4 percent decline in net income to $171.4 million with 26 cents earnings per share.
The average in a survey of 13 Wall Street analysts was projected at revenue of $2.96 billion and 12 analysts predicted earnings of 20 cents a share.
Company executives are confident in their growth strategy, viewing the Las Vegas Park MGM property as a new development taking on a ramping-up process similar to projects such as the MGM National Harbor and MGM Springfield in Massachusetts.
MGM Chairman and CEO Jim Murren said he doesn’t expect Park MGM to start ramping up until next year and that he and Chief Operating Officer Corey Sanders agree that the company won’t begin realizing its targeted cash flow until 2021.
‘Painful process’
“It’s been painful, it’s been a long arduous process, but it’s worth the effort and I think you’ll see pretty rapid ramp-up as all those elements come into place for ‘19,” Murren said, listing the completion of all room renovations under its NoMad “hotel-within-a-hotel” concept by next month, the completion of new restaurants and the Eataly project by December and a parade of residency entertainment that includes Lady Gaga, Britney Spears and Aerosmith over several months.
Las Vegas-based gaming analyst John DeCree said MGM shares have proven more resilient than the company’s peer group over the past three months.
“We believe this highlights confidence in the long-term outlook along with MGM’s diversified business, durable margin structure, strong balance sheet, and pending growth initiatives,” DeCree said in a note to investors.
In the company’s conference call with investors, executives also addressed:
-Investments abroad. Murren mentioned the company remains focused on its bid to participate in the process to open a resort in Japan. Responding to an analyst’s inquiry, Grant Bowie, CEO and executive director of MGM China Holdings, said the company would be positioned to negotiate an extension of its license in Macau. “We’re quietly confident, probably more than that, that we’ll be in position to do it,” Bowie said. “We obviously do expect there may be some expectations that we’ll need to work through. Discussions are ongoing with the (Chinese) government and it’s really going to be up to the government to make that final decision.”
-Sports betting. Murren said that the company’s Borgata property in New Jersey is performing well in the opening months of legalized sports wagering there and the company is continuing to work toward further expansion. “We’re already doing as much business in Borgata as any of our luxury properties do out here from almost a standing start,” Murren said. “We’re doing equally well in Mississippi. We’re working literally on a state-by-state basis with the appropriate state agencies to help them craft the best legislation for the respective states. I can’t overemphasize how exciting this is going to be over time for the bricks-and-mortar business of MGM Resorts as we develop global partnerships and relationships with customers and cross-market to our resorts.”
-Resort and parking fees. Responding to an analyst’s question regarding the effects of resort and parking fees, Murren cited the value proposition Las Vegas represents and noted the company closely monitors market conditions nationwide and globally. “We monitor this against all of our major competitive cities around the country and, in fact, around the world. We don’t think it has been an issue,” he said. “We always evaluate these market conditions and we look at not only the data we have but the data the (Las Vegas Convention and Visitors Authority) puts out. We know that from an (average daily room rate) perspective we’re still much lower than cities like Orlando or Chicago or Hawaii, but we continue to tweak it and we always will.”
MGM shares closed up 96 cents, 4 percent, to $25.19 a share Tuesday on above-average volume. After hourse, the share price went up another 31 cents, 1.2 percent, to finish at $25.50 a share.
Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.