Casino operator MGM Resorts’ stock took a pounding on Thursday after the company posted lower than expected earnings due to softness at its Las Vegas properties.
MGM released its Q4 and FY16 numbers on Thursday, and the company’s domestic resorts showed revenue up 17% to $1.8b in the three months ending December 31. However, revenue was up only 2% on a ‘same store’ basis, i.e. excluding contributions from the new National Harbor casino in Maryland and the fact that MGM now owns 100% of Atlantic City’s Borgata.
Domestic casino revenue was up 3% while room revenue gained 4% on a same store basis. MGM blamed the sluggish domestic growth in part on a lower number of convention-goers sleeping it off in an MGM hotel room. Adjusted property earnings were up 1% to $493m on a same store basis, well below analysts’ forecasts of $543m.
The MGM China operations in Macau reported flat revenue of $500m in Q4. Main floor table games were down 2% but VIP table revenue rose 7%. However, the VIP gains were due to MGM getting lucky, posting a win rate of 3.7% compared to 3% in Q4 2015. Actual VIP turnover was down 16% year-on-year.
Full year 2016 domestic revenue was up 4% to $7.1b while MGM China dropped 13% to $1.9b. Year-on-year net income comparisons are problematic due to some significant one-offs in the prior reporting periods, but MGM earned $25m in Q4 and $1.1b in FY16. Investors pummeled the stock anyway, pushing it down more than 9% to $26.86.
NATIONAL HARBOR A STAR, MGM COTAI A LATE BLOOMER
On the ensuing analyst call, MGM CEO Jim Murren said National Harbor was averaging over 22k visitors per day since its December opening and the company’s M Life reward program had signed up over 150k new members. Murren said it was “safe to say that National Harbor is already outperforming” and he was “more confident than ever” of its future profit potential.
Last month, the company pushed back the opening of its new MGM Cotai property in Macau to H2 2017. MGM COO Corey Sanders claimed the resort “will definitely be open, in our mind, in the fourth quarter” while Murren would say only that the company would likely have a more concrete timeline following its board meeting next month.