MGM Resorts International frustrated investors Wednesday with lower-than-expected fourth quarter results and then compounded the matter by lowering its targeted financial projections for 2020.
To make up for the disappointment, the company raised its quarterly cash dividend by 15%, announced a $3 billion share repurchase program, and said a $1.25 billion stock tender offer of between $29 and $34 a share would begin Thursday.
“There was plenty to unpack in MGM’s fourth quarter report, beyond the 12% (cash flow) miss,” said Macquarie Securities gaming analyst Chad Beynon.
Still, company shares were down more than 3% in after-hours trading.
“Our fourth quarter results were below our expectations,” said MGM Resorts Chairman and CEO Jim Murren, who announced before earnings were released that he would be stepping down from the company once a replacement is named. No timetable was given.
MGM Resorts blamed diminished play from its Far East baccarat business – notably at CityCenter’s Aria, Bellagio, and MGM Grand Las Vegas – for the reduced earnings companywide.
“All other dimensions of our business in Las Vegas performed on or ahead of plan,” Murren said.
Meanwhile, 2020 is getting off to a rough start for the company after the coronavirus outbreak in China forced the closure of MGM’s two Macau properties during the Chinese New Year holiday. MGM Resorts said the closures are costing the company $1.5 million a day in operating expenses, primarily in payroll. The company is paying staff and maintaining the properties.
“This does not reflect the medium or long-term outlook for the earnings potential of these assets,” Murren said of MGM Macau and MGM Cotai during a conference call with analysts. He said the casinos were earning $2.5 million a day in property cash flow before the virus hit.
“We are focused on the impacts of the coronavirus,” Murren said. “We’re absolutely prioritizing the safety of our customers and our employees.”
MGM Resorts, along with all other casino operators, closed gaming operations last week following a government order. Macau gaming revenue fell 11.3% in January due to the impact the virus had on visitation rates. The outbreak erupted just as the country was beginning to celebrate the Chinese New Year Holiday, often considered the busiest time in the gaming enclave.
“As we look into calendar year 2020, we expect certain headwinds, which we believe are unpredictable within a reasonable range of accuracy,” Murren said
Fourth quarter results
MGM said revenues for the quarter that ended Dec. 31 grew 4.3% to $3.185 billion. Domestically, cash flow was up 2.1%, but up less than 1% when factoring in Macau and CityCenter.
Net earnings of $2 billion, or $3.91 a share, during the quarter reversed a net loss of $23.3 million a year earlier. The jump in net income included proceeds from the $4.25 billion sale/leaseback of the Bellagio and the $825 million sale of Circus Circus.
#exclusive – Reduced Q4 results and lowered projections disappoint MGM Resorts investors. –@howardstutz, CDC Gaming Reports. https://t.co/hVsrYwpaYo @MGMResortsIntl #CDCgaming
— CDC Gaming Reports (@CDCNewswire) February 13, 2020
For the year, MGM Resorts said total net revenues increased 10% to $12.9 billion.
The company’s Strip resorts saw net revenues increase 2% to $5.8 billion while regional properties grew net revenues 21% to $3.5 billion. The regional segment was helped by contributions from Empire City Casino in New York and MGM Northfield Park in Ohio.
Macau net revenues increased 19% to $2.9 billion.
Shares of MGM Resorts closed at $33.66 Wednesday on the New York Stock Exchange, up 95 cents or 2.90%, which was before earnings were released or Murren’s announcement.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
