Is MGM Resorts Poised to Move Higher? - Analyst Blog

On May 22, 2014, we issued an updated research report on MGM Resorts International MGM.

On Apr 29, the leading casino resort company reported solid first-quarter results with earnings and revenues beating the Zacks Consensus Estimate. Adjusted earnings of 21 cents per share for the quarter compared favorably with the prior-year quarter figure of a penny. The better-than-expected bottom-line performance, especially in MGM China, led to the higher top line.

Total revenue increased 12% year over year, thanks to the good performance by its China and CityCenter businesses. Though Casino revenues at wholly owned domestic resorts declined 2%, MGM China's net revenue was up 26.0% year over year due to increases in main floor table games and VIP revenues.

The company's properties are well diversified in the U.S., which protects it from regional downturns. Going forward, limited supply, a moderate increase in visits in the Las Vegas market and improving trends at its urban complex — CityCenter — should bode well for domestic growth. MGM Resorts expects its Las Vegas business to grow further in 2014, gaining from solid convention bookings and completion of several capital initiatives on the Las Vegas Strip. We believe the company stands to gain market share with the gradual economic recovery.

Apart from the domestic market, the company is progressing well overseas too. MGM Resorts derives a solid share of its revenues from Macau, the largest gaming destination in the world. Despite concerns over a slowdown in China, the company expects the Macau market to continue to grow as a result of the growing Asian middle class population and infrastructure improvements, which are expected to facilitate more convenient travel to and within Macau.

The company also expects a positive trend in Macau buoyed by upgrades to main gaming floor products, marketing initiatives as well as substantial growth in Macau mass market gaming revenues. MGM Resorts plans to double its presence in Macau with the launch of MGM Cotai project in 2016 in Cotai Strip, Macau.

On the international front, Japan and South Korea have also caught the attention of the company. Driven by solid results, estimates for 2014 and 2015 largely moved up over the last 30 days for this Zacks Rank #2 (Buy) company.

Other Stocks to Consider

Investors interested in the gaming industry may consider stocks like Caesars Acquisition Co. CACQ, Wynn Resorts Ltd. WYNN and Multimedia Games Holding Company, Inc. MGAM. While Caesars Acquisition sports a Zacks Rank #1 (Strong Buy), Multimedia Games and Wynn Resorts carry a Zacks Rank #2.