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What's in Store for MGM Resorts (MGM) this Earnings Season?

Zacks Equity Research

MGM Resorts International MGM is scheduled to report first-quarter 2017 numbers on Apr 27, before the opening bell.

Last quarter, MGM Resorts posted a 35.29% negative earnings surprise. But prior to that, the company had posted positive earnings surprise in each of the three trailing quarters, bringing the average surprise in the last four quarters to a positive 159.15%.

Let’s see how things are shaping up for this announcement.

MGM Resorts International Price and EPS Surprise

MGM Resorts International Price and EPS Surprise | MGM Resorts International Quote

Factors Likely to Affect Q1 Results

MGM Resorts’ earnings in the to-be-reported quarter are expected to benefit from higher demand at its properties in Las Vegas on the back of improving employment rate trends and increasing tourism numbers in the region. In fact, with the Las Vegas Strip recording high occupancy rates, the company has been witnessing a solid rise in resort revenues, which should continue to boost the top line.

Moreover, the diversification of its resort portfolio and non-gaming options is likely to propel first-quarter revenues as well. Particularly, the opening of MGM National Harbor, a casino resort, on Dec 8, 2016, should drive revenues. Additionally, the company’s profit growth plan is poised to increase the quarter’s profits.

But sluggish performance in Macau has been hurting MGM Resorts’ revenues over the past various quarters. Nevertheless, per the Macau Gaming Inspection and Coordination Bureau, gross gaming revenues (GGR) rose in all the three months of the quarter, thereby continuing the revival in Macao.

Given the improved operating environment therein, the company’s consistent efforts to boost tourism and traffic in Macau started yielded results with MGM China revenues increasing 0.2% year over year in fourth-quarter 2016, thereby marking a turnaround. We thus expect the improvement to continue in to-be-reported quarter.

Conversely, the results may be somewhat hampered due to the lingering anxieties related to the sustainability of revenues from the VIP market.

Earnings Whispers

Our proven model does not conclusively show that MGM Resorts is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: MGM Resorts has an Earnings ESP of -3.85%. This is because the Most Accurate estimate is 25 cents, while the Zacks Consensus Estimate is pegged higher at 26 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: MGM Resorts has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.

Notably, we caution you against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

La Quinta Holdings Inc. LQ has an Earnings ESP of +50.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Churchill Downs Incorporated CHDN has an Earnings ESP of +13.73% and a Zacks Rank #3.

Hilton Worldwide Holdings Inc. HLT has an Earnings ESP of +10.71% and a Zacks Rank #3.

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MGM Resorts International (MGM): Free Stock Analysis Report
Churchill Downs, Incorporated (CHDN): Free Stock Analysis Report
Hilton Worldwide Holdings Inc. (HLT): Free Stock Analysis Report
La Quinta Holdings Inc. (LQ): Free Stock Analysis Report
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