MGM Resorts topped its own and analyst expectations in the third quarter, and the financial filing is delivering some much-needed good news to the Las Vegas gaming industry.
In the quarterly report released yesterday, MGM said revenue increased seven percent to $3.03 billion. Net income was $171.4 million, or 26 cents per share. Analysts were calling for revenue of $2.96 billion, and 20 cents per share.
The third quarter was predicted to be a difficult period for casino operators largely focused on Las Vegas. While MGM of course benefits from its two integrated resorts in China’s Macau, as well as its casinos in Maryland, Michigan, Mississippi, New Jersey, and now Massachusetts, the company still owns and operates nearly half of the Las Vegas Strip properties.
June through August 2018 was a difficult comparable to 2017 due to the Floyd Mayweather and Conor Mayweather boxing match, as well as more entertainment offerings in the prior year that MGM CEO Jim Murren called “an exceptionally strong event calendar.”
Shares of MGM Resorts on the New York Stock Exchange jumped on the 3Q news. The stock closed up nearly five percent on Tuesday.
Outstripping the Strip
Along with the difficult comparison, analysts were concerned that higher expenses stemming from the opening of MGM Springfield would lead to lower net income. The $960 million Massachusetts integrated resort opened in August.
MGM was also still in the process of finishing Park MGM, the former Monte Carlo, during the third quarter. The new Strip resort offers a boutique hotel-within-a-hotel called the NoMad, which opened this month. The makeover kept fewer rooms available for occupancy in the 3Q.
As for the forecasted softening in Las Vegas visitation, the prediction came true for MGM. The company said total occupancy totaled 93 percent, down two percent from 2017. The average daily rate was down $3.
Only the Bellagio, Luxor, and New York-New York managed to post higher occupancy rates. Park MGM was the biggest loser, with occupancy at 84.5 percent, down from 93.1 percent.
Despite the visitor volume challenges, MGM managed to increase earnings for shareholders. Murren said he’s optimistic moving forward with the company’s portfolio both domestically and abroad, and believes sports betting will provide a new influx of revenue.
As for those pesky resort and parking fees that seem to constantly be increasing in Las Vegas, the executive said he doesn’t think it has kept visitors away.
Caesars Entertainment CEO Mark Frissora sent the Las Vegas gaming industry into a tailspin during his company’s second quarter call where he warned investors about the softening in demand. His comments fueled a Caesars stock selloff, which prompted NASDAQ to halt its trading.
Unlike MGM, which makes about 21 percent of its revenue from Macau, Caesars is more dependent on Las Vegas. Caesars will hold its third quarter conference call on November 1. It will have many ears.
MGM and billionaire Tilman Fertitta’s Golden Nugget are reportedly both interested in acquiring Caesars, though no party has yet confirmed that any formal negotiations have occurred.
Frissora’s job is also at stake, as activist investors want new leadership or a sale of the company.