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Thursday, December 2, 2021

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What to Look for From MGM

Key Takeaways

  • Analysts estimate adjusted EPS of -$0.02 vs. -$1.08 in Q3 FY 2020.
  • MGM’s Las Vegas room occupancy fee is predicted to rise considerably YOY.
  • Income is predicted to greater than double YOY, however will nonetheless be beneath pre-pandemic ranges.

MGM Resorts Worldwide (MGM) racked up practically $2 billion in internet losses final yr as vacationer journeys to its accommodations and casinos plunged amid the worldwide COVID-19 pandemic. However this yr, issues are trying higher. MGM’s income and resort occupancy have rebounded sharply as worries in regards to the pandemic have eased amid rising vaccinations.

Traders will look carefully at whether or not MGM’s restoration is continuous when the corporate reviews Q3 earnings for its fiscal yr (FY) 2021 after market shut on Nov. 3, 2021. Analysts anticipate the corporate’s adjusted loss per share to slim dramatically as income greater than doubles year-over-year (YOY).

Traders can even concentrate on MGM’s Las Vegas room occupancy fee. The room occupancy fee is a key metric exhibiting the variety of obtainable rooms which might be being occupied by paying company in Las Vegas, which is MGM’s largest market. For Q3, analysts estimate that the Las Vegas room occupancy fee will greater than double YOY, although the speed will nonetheless be properly beneath pre-pandemic ranges.

MGM shares have skyrocketed up to now yr. Since breaking forward of the market in November 2020, MGM inventory has persistently outperformed. Nonetheless, throughout that interval it traded sideways in a variety for about six months, from late February by means of August 2021. Since then, the shares have made a robust advance. MGM’s shares have supplied a 1-year trailing whole return of 131.2%. That is far forward of the S&P 500’s whole return of 39.4% for a similar interval.

Supply: TradingView.

MGM Earnings Historical past

MGM’s enterprise has been closely impacted by the sharp discount in tourism and leisure journey in 2020 as a result of COVID-19 pandemic. That has inflicted six straight quarters of adjusted losses per share from Q1 FY 2020 to Q2 FY 2021. Earlier than that, MGM had posted only one quarter of adjusted losses within the three fiscal years of 2017, 2018, and 2019. Adjusted losses per share have been widest in Q2 FY 2020 and have narrowed every quarter since on a sequential foundation. For Q3 FY 2021, analysts anticipate MGM to dramatically slim its losses each sequentially and YOY. They estimate a comparatively adjusted loss per share of $0.02.

The corporate’s latest income historical past has been equally weak. MGM posted 5 consecutive quarters of YOY income declines from Q1 FY 2020 by means of Q1 FY 2021. In Q2 FY 2021, income skyrocketed 682.6% to its highest degree since This fall FY 2019. For Q3 FY 2021, analysts additionally see robust progress as income greater than doubles to $2.4 billion. That also can be properly beneath the $3.2 billion in income MGM posted in This fall FY 2019, simply earlier than the pandemic.

MGM Key Stats
  Estimate for Q3 FY 2021 Q3 FY 2020 Q3 FY 2019
Adjusted Earnings Per Share -$0.02 -$1.08 $0.31
Income (B) $2.4 $1.1 $3.3
Las Vegas Room Occupancy Price (%) 82.5 44.0 92.0

Supply: Visible Alpha

The Key Metric

As talked about above, traders can even be specializing in the room occupancy rate for MGM’s properties in Las Vegas, the corporate’s largest market. The corporate owns 13 resort properties in Las Vegas, together with the Bellagio, MGM Grand, Luxor, Mandalay Bay, The Mirage, and Excalibur. The room occupancy fee, a metric indicating the share of a resort’s rooms being occupied by paying company, is a vital metric used within the resort trade to gauge an organization’s capacity to cowl its mounted prices and generate optimistic earnings. Most of the prices of operating a resort or resort property are hire or mortgage bills, utility payments, and wages. These are comparatively mounted whatever the whole variety of company. Empty rooms imply misplaced earnings because the marginal cost of a further visitor is negligible in comparison with the marginal revenue.

MGM’s room occupancy charges have fallen considerably as a result of COVID-19 pandemic. After at the least 12 consecutive quarters within the mid-80s to mid-90s, occupancy plunged to 43% in Q2 FY 2020, then reached its lowest level at 38% in This fall of that yr.

Since This fall FY 2020, occupancy charges have improved. Q1 FY 2021 was 46%, and charges rose to 77% in Q2 FY 2021. Now, analysts anticipate that MGM’s Las Vegas occupancy fee will rebound to 82.5% in Q3. It is a marked enchancment from the lows earlier within the pandemic, however it’s nonetheless considerably beneath a typical pre-pandemic quarter.

A particular notice that MGM specifies in its public paperwork that rooms that have been out of service in the course of the three months ended June 30, 2020, on account of pandemic-related resort closures weren’t counted as a part of the full obtainable room rely. Whereas this method will not be a deliberate try mislead, traders needs to be conscious that the room occupancy fee can be even decrease if these rooms have been added to the full.

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