Shares of MGM Resorts International (MGM), reached a new 52-week high of $28.75 on Jan 7, 2014 eventually closing at $28.29. The closing price of the casino operator reflects a solid year-to-date return of 19.3%. The trading volume for the session was 11.3 million shares.
Despite the strong price appreciation, this Zacks Rank #2 (Buy) stock has plenty of upside left, given its strong estimate revisions over the last 30 days as well as expected year-over-year earnings growth of 52.1% for 2014.
Growth Drivers
Impressive fourth-quarter 2013 results (reported Feb on 19) — including a higher top line and a healthy capital position — have been the primary growth drivers for MGM Resorts.
MGM Resorts’ fourth-quarter 2013 earnings came in at 11 cents per share, comprehensively beating the Zacks Consensus Estimate of a loss of a penny. The quarterly results were driven by improvement in revenues as well as adjusted earnings before interests, taxes, depreciation and amortization (EBITDA).
In fact, MGM Resorts delivered positive earnings surprises for the trailing four quarters with a substantial average beat of 449.2%.
The company’s earnings were primarily driven by outstanding results by its subsidiary, MGM China. MGM China’s net revenue was up 27% year over year to $926.0 million due to increases in main floor table games and VIP revenues. Main floor table games and slot revenues went up 18% and 4% year over year, respectively. VIP table games turnover increased a significant 32%.
MGM Resorts is also progressing well with its casino-hotel development project in Macau’s Cotai Strip. We believe the company’s Macau business will receive a further boost from the opening of the Cotai Strip property in 2015, which in turn should help it to increase market share in the region.
Further, the company’s domestic operations posted healthy results, driven mainly by the company’s business in Lag Vegas, which is speedily recovering from the damage caused by recession. Slot revenues in the company’ domestic operations were up 3% mainly driven by continued impressive performances at the Las Vegas Strip properties. Room revenues increased 3.0%, primarily attributable to increased revenue per available room (RevPAR) at the Las Vegas Strip properties.
Estimate Revisions Show Potency
The estimates were mostly revised upwards in response to the strong results. The Zacks Consensus Estimate for 2014 increased 48.0% and that for 2015 went up 18.6% over the last 30 days.
Other stocks that are worth considering include Wynn Resorts Ltd. (WYNN), Melco Crown Entertainment Ltd. (MPEL) and Las Vegas Sands Corp. (LVS). While Wynn Resorts sports a Zacks Rank #1 (Strong Buy), Melco Crown and Las Vegas Sands carry the same Zack Rank as MGM Resorts.
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