MGM ‘exceeds expectations’ in third quarter despite declines at its Las Vegas properties

October 31, 2018 4:04 AM
  • Howard Stutz, CDC Gaming Reports
October 31, 2018 4:04 AM
  • Howard Stutz, CDC Gaming Reports

It could have been worse.

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Despite all the dire projections of a third quarter meltdown, MGM Resorts International said the company’s actual results for the three-month period that ended Sept. 30, “exceeded expectations.”

The casino giant said Tuesday its total net revenues grew 7 percent to just over $3 billion for the quarter. However, the company’s Las Vegas resorts – where much of the investment community trained its focus – saw total revenues decline 6.5 percent to $1.45 billion.

Even with revenue per available room – a non-traditional metric used to gauge profitability – falling 3.9 percent at MGM’s Las Vegas Strip resorts, analysts seemed satisfied that the figure wasn’t lower. MGM Chairman and CEO Jim Murren said on a conference call the company expected revenue per available room to increase 1 percent to 2 percent in the year’s last three months.

The hour-long call was much more subdued than three months ago, when MGM executives pushed back as analysts questioned why revenue per available room was dropping.

“It was a challenging quarter and our operating performance exceeded our expectations,”  Murren said. “We’re setting up nicely for the fourth quarter.”

Murren also calmly deflected a question about resorts, paid parking and other charges facing Las Vegas customers.

“Las Vegas still represents a value proposition,” Murren said. “When you look at the convention business, our (average daily room rates) are much lower than Orlando, Hawaii or Chicago.”

During the third quarter, MGM Resorts net income declined from $148 million a year ago to $143 million while earnings per share was unchanged at 26 cents.

The results, however, exceeded Wall Street expectations. Analysts surveyed by Zacks Investment Research predicted earnings of 18 cents per share and revenue of $2.91 billion.

“Las Vegas is not falling off a cliff and third quarter Vegas results were better than feared.” Credit Suisse gaming analyst Cameron McKnight said after the call. “Convention outlook is very positive, with 20 percent to 30 percent attendance growth in the fourth quarter and 6 percent in the first half of 2019. We think MGM is setting fourth quarter expectations appropriately.”

In the U.S., MGM’s operating income was $435 million, compared to $545 million in 2017 third quarter. The company said its results were impacted by $31 million of pre-opening expenses at $960 million MGM Springfield in Massachusetts, which was unveiled at the end of August.

The company also continued work on transitioning the Monte Carlo on the Strip to Park MGM, which disrupted business. Murren said the change-over has been “painful,” but worthwhile. Boutique hotel operator NoMad opened its hotel-within-a-hotel earlier this month, taking over the top four floor on Park MGM. Murren said all the work, including a new lobby and Strip entrance, will be completed by December.

“This is a new property, a brand new property,” he said.

In Macau, MGM China grew revenues 37 percent to $606 million, due primarily to MGM Cotai, which opened in February. The company’s two Macau casinos reported net income of $52 million, compared to $38 million a year ago from just MGM Macau.

Shares of MGM Resorts were up 96 cents or 3.96 percent to close at $25,19 on the New York Stock Exchange. In after hours tradings, shares of MGM were up more than 1 percent.

Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.