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Why Is MGM (MGM) Up 11% Since Last Earnings Report?

Zacks Equity Research
·4-min read

A month has gone by since the last earnings report for MGM Resorts (MGM). Shares have added about 11% in that time frame, outperforming the S&P 500.

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

MGM Resorts Posts Narrower-than-Expected Loss in Q4

MGM Resorts reported fourth-quarter 2020 results, wherein both earnings and revenues beat the Zacks Consensus Estimate. While the bottom line surpassed the consensus mark for the third straight quarter, the top line beat estimates after missing the same in the preceding six quarters. However, both the metrics declined sharply year over year.

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The company’s results were impacted by the coronavirus pandemic. It continues to be hurt by dismal regional operations. CEO and president of MGM Resorts, Bill Hornbuckle said "We remain confident in the long-term recovery of our business. We have strengthened our operational foundation through cost efficiencies that position us for sustainable growth, as solutions to the public health crisis accelerate and restrictions continue to ease."

Earnings & Revenues Discussion

MGM Resorts reported adjusted loss per share of 90 cents, narrower than the Zacks Consensus Estimate of a loss of 96 cents. In the prior-year quarter, the company had reported adjusted earnings per share of 8 cents.

Total revenues were $1,493.5 million, which outpaced the Zacks Consensus Estimate of $1,472 million. However, the top line declined 53% year over year. The downside can primarily be attributed to the temporary closure of certain domestic properties during the quarter, lower business volume, and other restrictions in Macau and domestic market on account of the coronavirus pandemic. Moreover, travel restrictions impacted the company’s performance in the quarter under review.

MGM China

MGM China’s net revenues slumped 58% year over year to $305 million, due to the coronavirus pandemic. VIP Table Games Hold adjusted MGM China net revenues plunged 57% year over year to $303 million.

MGM China’s adjusted property EBITDAR (Earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs) declined 78% to $41 million. Moreover, VIP Table Games Hold adjusted MGM China adjusted property EBITDAR fell 76% to $43 million.

Domestic Operations

Net revenues at Las Vegas Strip Resorts during the fourth quarter were $480 million, down 66% year over year on account of the pandemic. Adjusted property EBITDAR declined 86% year over year to $54 million.

During quarter under review, net revenues from the company's regional operations totaled $595 million, down 34% from the prior-year quarter due to the pandemic and related operational restrictions. Adjusted property EBITDAR were $159 million, down 30% year over year. Moreover, adjusted property EBITDAR margin contracted 129 basis points year over year.

Casino revenues in the quarter under review fell 38% year over year at the company's Las Vegas Strip Resorts primarily due to operational and travel restrictions due to the pandemic. Moreover, slots handle declined 41%. Notably, slots handle decreased 29% at its Regional Operations.

Balance Sheet

MGM Resorts ended the fourth quarter with cash and cash equivalents of $5,101.6 million compared with $2,329.6 million on Dec 31, 2019. The company’s long-term debt at the end of quarter stands at $12,376.7 million, compared with $11,168.9 million as of Dec 31, 2019.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -16.1% due to these changes.

VGM Scores

Currently, MGM has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise MGM has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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