MGM Shares Surge on Second-Quarter Revenue Surprise Led by Macau, Regional Properties

Shares of MGM Resorts International (NYSE:MGM) surged more than 6 percent during Thursday’s after-market trading after the largest operator on the Las Vegas Strip reported second-quarter revenue that topped expectations.

For the quarter ending June 30, MGM posted revenue of $3.22 billion, a 13 percent increase on a year-over-year basis and $10 million ahead of analysts’ estimates for the company’s top line. On adjusted basis, the Bellagio owner earned 23 cents a share in the second quarter, below Wall Street’s forecast of 26 cents.

Net income for the April through June timeframe dipped to $43 million from $121 million a year earlier due in part to the gaming company taking a $43 million charge related to the MGM 2020 cost-cutting initiative.

Our Las Vegas Strip Resorts saw an increase in revenues by 1 percent with non-gaming revenues up 5 percent thanks to a robust performance across our rooms, food and beverage and entertainment segments,” said MGM CEO Jim Murren in a statement. “This offset a 12 percent decline in gaming revenues.”

During the quarter, MGM’s gross gaming revenue (GGR) slumped 12 percent in Las Vegas, which the company said was two-thirds attributable to lower a table games hold and one-third derived from weakness in baccarat.

Other Drivers

Some gaming companies that have reported second-quarter earnings have highlighted softness in Macau, the only Chinese territory where gambling is legal. However, that was not the case with MGM. The company said revenue at its MGM Cotai property there soared 26 percent year-over-year to $706 million as earnings before interest, depreciation and amortization (EBITDA) climbed 43 percent to $171 million.

VIP table game revenue at MGM Cotai increased 22 percent in the quarter after the operator opened a dedicated high-roller area at that property in the second half of last year.

MGM Northfield Park in Ohio and Empire City Casino in New York combined for $123 million of that. The MGM Grand owner also provided updates on the MGM 2020 plan.

“We feel increasingly confident that we will achieve our phase 1 Adjusted EBITDA uplift target of $200 million in 2020, compared to when we started the Plan,” said CFO and Treasurer Corey Sanders in the statement. “In fact, we now expect to realize roughly $100 million in 2019 compared to our previous guidance of around $70 million.”

Real Estate Talk

The earnings statement did not contain explicit details regarding the rumored sales of the Bellagio and MGM Grand in Las Vegas, moves that could net the company $6 billion to $7 billion before taxes.

On a conference call with analysts and investors, Murren did say the company’s real estate committee, a group of board members formed earlier this year aimed at unlocking value at the company’s properties, “is making progress.”

Murren added that he anticipates sharing results from the committee’s efforts in the early fall. He characterized the company’s real estate assets as “mispriced” and that an “asset lighter” model makes sense.

During the second quarter, MGM spent $282 million to repurchase 11 million shares of its stock at an average price of $25.61, indicating the company got a good deal relative to Thursday’s closing price of $29.37. At the end of the quarter, the company had $1.1 billion left on a $2 billion buyback plan.

As of June 30, the gaming company had $1.2 billion in cash and $14.8 billion in debt.