MGM Mirage profits increase
MGM Mirage owns 10 Strip resorts and is building several others. But don’t refer to the company as a casino operator.
MGM Mirage said its earnings jumped 18 percent in the third quarter compared with a year ago, fueled by higher room rates and occupancy, increased revenues from non-gaming sources and an insurance payout stemming from the company’s losses from Hurricane Katrina two years ago.
Overall, for the three-month period ended Sept. 30, MGM Mirage said earnings were $183.9 million, or 62 cents per share, compared with $156.3 million, or 54 cents per share, in the third quarter of 2006. Excluding one-time items, however, earnings per share fell to 42 cents. Analysts polled by Thomson Financial expected net income of 50 cents per share.
During the quarter, the company received a $107 million insurance recovery payment related to losses suffered at the Beau Rivage in Biloxi, Miss., from the Hurricane Katrina disaster in August 2005. The casino reopened on the anniversary of the storm.
Quarterly revenue rose 6 percent to $1.9 billion from $1.8 billion. The bulk of MGM Mirage’s revenues, roughly 61 percent, came from nongaming resources, a figure that MGM Mirage Chairman and Chief Executive Officer Terry Lanni said will increase.
"It varies from property to property, but this is the direction that our company, and quite frankly, many others are moving," Lanni said following a conference call with analysts and investors.
Companywide during the quarter MGM Mirage said revenues generated by hotel rooms grew almost 7 percent, restaurant revenue climbed 10 percent and entertainment revenues were up 12.6 percent. During the same time, casino revenues jumped 2.7 percent.
On the Strip, MGM Mirage said hotel occupancy hit 97 percent, up from 96 percent, despite having 29,000 fewer available rooms due to remodeling at several resorts. The average daily room rate at a MGM Mirage Strip room increased to $147 from $140, while revenue-per-available room jumped to $143 from $135.
"Key volume indicators that we have come to rely on to gauge our Las Vegas business remain strong," MGM Mirage President and COO Jim Murren said in a statement. "These metrics suggest continued growth over the upcoming quarters."
The company said that its gaming revenues would have fallen 3 percent if not for results from the Beau Rivage, which dismayed gaming analysts.
Goldman Sachs gaming analyst Steven Kent said the company’s flagship Bellagio showed a cash flow decline in the mid-teens.
"MGM Mirage results were disappointing as gaming revenues continue to show declines," Kent said in a note to investors. "Nongaming growth was not enough to offset the year-over-year decline in casino revenues. Although we believe that MGM is a ‘blue chip’ company and management team, it is hard to ignore what looks to be like a deceleration in profitability and rising development costs."
CIBC World Markets gaming analyst David Katz thought the MGM Mirage earnings announcement, made before trading opened Tuesday on the New York Stock Exchange, would disappoint investors.
"Although the results were below our Street-high estimate on impact from several property initiatives, we do not believe they reflect fundamental weakness in Las Vegas or other key markets," Katz said in a note to investors. "Further, the results do not alter our positive thesis on the name, as we view MGM Mirage as a catalyst story."
Shares of MGM Mirage closed at $91.29, down $1.63 or 1.75 percent.
Contact reporter Howard Stutz at hstutz@reviewjournal.com or (702) 477-3871.
54 cents Earnings per share 2006 42 cents Earnings per share 2007 50 cents Analysts estimates per share for 2007 CITYCENTER BUDGET INCREASES The budget for Las Vegas’ most expensive construction project grew a little larger Tuesday. MGM Mirage said building costs for the 76-acre CityCenter development on the Strip had increased $400 million to $7.8 billion. The project includes a 4,000-room hotel-casino, four high-rise residential and condominium-hotels, and an entertainment, dining and retail district. MGM Mirage Chairman Terry Lanni said the complexity of CityCenter, which required more steel and concrete than has been previously budgeted, was the reason for cost increase. "We’re not going to sacrifice quality," Lanni said. &Quot;This is a major investment that will transform the industry. We have one chance to make a good first impression and we want to do it right.&Quot; During a conference call with analysts and investors, MGM Mirage executives said CityCenter, which is expected to open in 2009, has contracted more than $1.5 billion in residential sales. CityCenter has 2,700 condominium and condominium-hotel units. MGM Mirage announced it would open a sales center for CityCenter in Dubai by June. Dubai World, the investment arm of the Persian Gulf state, spent $2.7 billion to acquire 50 percent of CityCenter in August. MGM Mirage also said the budget for the soon-to-open 600-room MGM Grand Macau increased to $1.25 billion from $1.1 billion. HOWARD STUTZ / REVIEWJOURNAL
