MGM Earnings: What to Look For

Economy
  • MGM Earnings History
  • The Key Metric

Key Takeaways

  • Analysts estimate adjusted EPS of $0.02 vs. -$0.90 in Q4 FY 2020.
  • MGM's Las Vegas room occupancy rate is expected to rise significantly YOY.
  • Revenue is expected to rise as more people visit MGM casinos and hotels as the COVID-19 pandemic recedes.

MGM Resorts International (MGM) suffered more than $1.9 billion in net operating losses in 2020 as its revenue was decimated by the impact of the COVID-19 pandemic. The company’s fortunes have changed in recent quarters as MGM’s casinos and hotels have begun to recover amid vaccine rollouts. But as it rebounds, MGM is also focusing on new growth areas, including sports betting and plans to build a $9 billion casino resort in Japan.

Investors will focus closely on the speed of MGM’s recovery, as well as these new growth initiatives, when the company reports earnings on Feb. 9, 2022 for Q4 FY 2021. Analysts expect MGM to report its second straight quarter of positive adjusted earnings per share (EPS) after six consecutive quarters of adjusted losses. Revenue is expected to rise for the third straight quarter after a string of declines.

Investors will also focus on MGM's Las Vegas room occupancy rate. The room occupancy rate is a key metric showing the number of available rooms that are being occupied by paying guests in Las Vegas, which is MGM's biggest market. For Q4, analysts estimate that the Las Vegas room occupancy rate will more than double YOY, though the rate will still be well below pre-pandemic levels.

Shares of MGM have outperformed the broader market over the past year. The stock has been extremely volatile, oscillating between outperformance and underperformance during various periods. But it is currently outperforming. MGM's shares have provided a total return of 28.2% over the past year, above the S&P 500's total return of 14.5%.

MGM Earnings History

MGM reported Q3 FY 2021 earnings that beat analysts’ expectations. Adjusted EPS was positive for the first time since Q4 FY 2019. Revenue rose 140.5% year over year (YOY), marking the second straight quarter of revenue growth after five consecutive quarters of declines. The company said that its third quarter results benefited from the removal of operational and capacity restrictions as well as a pick up in travel.

In Q2 FY 2021, MGM reported earnings and revenue that beat consensus estimates. The company reported an adjusted loss per share that was much narrower than expected, but it marked the sixth straight quarter of adjusted losses per share. Revenue rose nearly eightfold compared to the year-ago quarter, ending the streak of five straight quarters of declining revenue. Results for the quarter were positively impacted by an easing of restrictions as well as an increase in travel.

Analysts expect MGM to post its second consecutive quarter of positive adjusted EPS as revenue expands 85.9% compared to the year-ago quarter. It would be the third straight quarter of rising revenue after a five-quarter string of declines. For full-year FY 2021, analysts expect MGM to report its second straight year of adjusted losses per share, though much smaller than the previous year's. Annual revenue is expected to rebound 82.1% after falling 60.0% in FY 2020.

MGM Key Stats
  Estimate for Q4 FY 2021 Q4 FY 2020 Q4 FY 2019
Adjusted Earnings Per Share ($)  0.02 -0.90 0.08
Revenue ($B) 2.8 1.5 3.2
Las Vegas Room Occupancy Rate 82.4 38.0 89.0

Source: Visible Alpha

The Key Metric

As mentioned above, investors will also be focusing on the room occupancy rate for MGM’s properties in Las Vegas, the company’s biggest market. The company operates 13 resort properties in Las Vegas, including the Bellagio, MGM Grand, Luxor, Mandalay Bay, and Excalibur. The room occupancy rate, a metric indicating the percentage of a resort’s rooms being occupied by paying guests, is a critical metric used in the hotel industry to gauge a company’s ability to cover its fixed costs and generate positive earnings. Many of the costs of running a hotel or resort property are rent or mortgage expenses, utility bills, and wages. These are relatively fixed regardless of the total number of guests. Empty rooms mean lost earnings as the marginal cost of an additional guest is negligible compared to the marginal revenue.

MGM's Las Vegas room occupancy rate was decimated in FY 2020 due to the COVID-19 pandemic. The annual room occupancy rate for MGM's Las Vegas properties was 91.0% in each of the three years starting in FY 2017 through the end of FY 2019 before falling to 55.0% in FY 2020. It's important to note that MGM's published room occupancy rate does not tell the full extent of the pandemic's impact. MGM does not include rooms that were out of service due to pandemic-related hotel closures in its total available room count when calculating the room occupancy rate. This is not a deliberate attempt to be misleading on MGM's part, but investors should be aware that if those rooms were counted as part of the total available, then the room occupancy rate would be even lower.

MGM's Las Vegas quarterly room occupancy rate reached as low as 38.0% in the final quarter of FY 2020. It has increased since then amid vaccine rollouts and the easing of restrictions. The Las Vegas room occupancy rate rose to 46.0% in the first quarter of FY 2021, then to 77.0% in the second quarter, and to 82.0% in the third. Analysts expect an occupancy rate of 82.4% for MGM's Las Vegas properties in Q4 FY 2021. That rate is a significant improvement from the lows of the pandemic, but it is expected to remain relatively flat compared to Q3 FY 2021. For full-year FY 2021, analysts expect the annual Las Vegas room occupancy rate to be 71.9%, a significant improvement from a year earlier.

Article Sources

  1. Wall Street Journal. "MGM Resorts Reveals Plans for $9 Billion Casino in Japan." Accessed Feb. 8, 2022.

  2. The Wall Street Journal. "Hard Rock to Buy Mirage Casino on Las Vegas Strip for $1.1 Billion." Accessed Feb. 8, 2022.

  3. MGM Resorts International Inc. "MGM RESORTS INTERNATIONAL ANNOUNCES FOURTH QUARTER AND FULL YEAR 2021 EARNINGS RELEASE DATE." Accessed Feb. 8, 2022.

  4. Visible Alpha. "Financial Data." Accessed Feb. 8, 2022.

  5. Yahoo! Finance. "MGM Resorts International (MGM): Analysis." Accessed Feb. 8, 2022.

  6. MGM Resorts International Inc. "MGM RESORTS INTERNATIONAL REPORTS THIRD QUARTER 2021 FINANCIAL AND OPERATING RESULTS." Accessed Feb. 8, 2022.

  7. MGM Resorts International Inc. "MGM RESORTS INTERNATIONAL REPORTS SECOND QUARTER 2021 FINANCIAL AND OPERATING RESULTS," Page 1. Accessed Feb. 8, 2022.

  8. MGM Resorts International Inc. "MGM Resorts Destinations." Accessed Feb. 8, 2022.

  9. MGM Resorts International Inc. "Form 10-K for the fiscal year ended December 31, 2020," Page 39. Accessed Feb. 8, 2022.

  10. MGM Resorts International Inc. "MGM RESORTS INTERNATIONAL REPORTS THIRD QUARTER 2021 FINANCIAL AND OPERATING RESULTS." Accessed Feb. 8, 2022.

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