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MGM (MGM) Down 13% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for MGM Resorts (MGM). Shares have lost about 13% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is MGM due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

MGM Resorts Q3 Earnings & Revenues Beat Estimates

MGM Resorts reported better-than-expected third-quarter 2021 results, wherein both earnings and revenues beat the Zacks Consensus Estimate. While the bottom line surpassed the Zacks Consensus Estimate for the sixth straight quarter, the top line beat the same for the fourth consecutive quarter. Both the metrics also improved on a year-over-year basis.

The company’s third-quarter results benefited from robust demand for its gaming entertainment offerings.

Earnings & Revenue Discussion

MGM Resorts reported an adjusted earnings per share of 3 cents, which compared favorably with the Zacks Consensus Estimate of a loss of 4 cents. In the prior-year quarter, it had reported an adjusted loss of $1.08 per share.

Total revenues were $2,707.5 million, which surpassed the Zacks Consensus Estimate of $2,469 million. The top line improved a whopping 140.5% from $1,126 million in the year-ago period. The upside was primarily driven by the rise in Casino, MGM China, BetMGM, and other sports betting and iGaming revenues.

MGM China

MGM China’s net revenues soared 517% year over year to $289 million. However, the figure is still down 61% compared with third-quarter 2019. VIP Table Games Hold adjusted MGM China net revenues improved 403% year over year to $272 million.

MGM China’s adjusted property EBITDAR (Earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs) amounted to $7 million against a loss of $96 million in the prior-year quarter. VIP Table Games Hold adjusted MGM China adjusted property EBITDAR loss was $2 million compared with a loss of $93 million in the prior-year quarter.

Domestic Operations

Net revenues at Las Vegas Strip Resorts during the third quarter were $1.4 billion, up 187% year over year, owing to the removal of operational and capacity restrictions, and increase in travel. However, the segment’s revenues are still down 8% compared with third-quarter 2019. Adjusted property EBITDAR improved to $535 million from $15 million in the prior-year quarter. Casino revenues in the quarter under review were $423 million, up 123% year over year.

During the quarter under review, net revenues from the company's regional operations totaled $925 million, up 66% from the prior-year quarter. This upside can primarily be attributed to the elimination of mandated operational and capacity restrictions, and increase in travel. Adjusted property EBITDAR was $348 million, up 139% year over year on account of a rise in casino revenues and cost-saving efforts. Adjusted property EBITDAR margin expanded 886 basis points year over year to 37.6%.

Casino revenues in the quarter under review climbed 55% from the year-ago level of $720 million.

Balance Sheet & Share Repurchase

MGM Resorts ended the third quarter with cash and cash equivalents of $5,570.8 million compared with $5,101.6 million on Dec 31, 2020. The company’s long-term debt at the end of quarter stood at $11,618.9 million, down from $12,376.7 million as of Dec 31, 2021.

During the third quarter, the company repurchased nearly $17 million of shares at an average price of $39.88 per share for $687 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 106.06% due to these changes.

VGM Scores

At this time, MGM has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, MGM has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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