Las Vegas-based casino operator MGM Resorts International’s weak projections for the third quarter sparked a stock sell-off on Thursday.
MGM stocks dropped to a 52-week low after MGM Chairman and CEO Jim Murren announced that its net income dropped 41 percent to $123.8 million or $0.21 a share for the three months that ended June 30, 2018. MGM also registered revenue of $2.86 billion in the second quarter, below analysts’ expectations of $2.99 billion.
“Our second quarter came in better than we expected and we made significant progress to capitalize on future growth opportunities in sports betting and Japan,” Murren said in a statement.
MGM was the latest casino giant to report disappointing results and trim its business forecast as demand faltered in Las Vegas and Macau.
Excluding Park MGM, the casino operator reported that net revenues of its domestic brick-and-mortar facilities in Q2 2018 rose 3 percent to $2.2 billion compared to the same period in 2017. Revenue per available room (RevPAR) at MGM’s Las Vegas Strip resorts was up 2.8 percent in the three months that ended June 30, 2018.
MGM Resorts’ net income plunged by almost 50 percent to $124 million from $210 million in the prior year quarter. Operating income of MGM’s other domestic resorts was also down 13.65 percent to $449 million year-on-year, while adjusted EBITDA dropped 5 percent to $626 million.
Across the Pacific, MGM China Holdings Ltd. recorded net revenue of $561.4 million for the second quarter of 2018, an increase of 32.4 percent compared to the same period last year. MGM China’s adjusted property EBITDA inched up by 0.8 percent to $120 million while its operating income was flat at US$46.4 million.
MGM China attributed the result to the ramp-up phase of operations at MGM Cotai and lower win percentages for both main floor and VIP table games compared to the prior year quarter.
In a conference call with analysts on Thursday, Murren noted that the firm saw “some discrete pockets of rate pressure,” forcing the company to trim hotel room prices during the second and third quarters. However, Murren downplayed the worries over hotel bookings saying that business is usually slow during the summer.
Murren also pointed out that the Group’s third quarter results will be in for a tough comparison given that MGM hosted the two biggest sporting events during Q3 2017, including the marquee fight between boxing champion Floyd Mayweather and UFC champion Conor McGregor.
“You guys get so worked up about a couple of weeks,” Murren said. “Do we think there is anything structurally going on in Vegas? The answer is no. If I shared that concern, I would tell you. We’re going to be stronger in the fourth quarter going into next year.”
