MGM Earnings: What Happened With MGM

Key Takeaways Adjusted EPS was -$0.90 vs. the -$0.89 analysts expected. Revenue fell below analyst

Key Takeaways

  • Adjusted EPS was -$0.90 vs. the -$0.89 analysts expected.
  • Revenue fell below analyst expectations.
  • The Las Vegas Strip room occupancy rate was lower than the level forecast.
  • BetMGM, MGM’s online gambling app, gained significant market share.

What Happened

MGM reported an adjusted loss per share for Q4 FY 2020 that was slightly larger than analysts expected. Revenue missed expectations and fell by more than half the year-ago quarter’s total revenue. MGM’s Las Vegas Strip room occupancy rate missed expectations by a wide margin. Analysts were forecasting sequential improvement in the occupancy rate for the firm’s Las Vegas properties compared to Q3 and Q2. Instead, that rate fell to its lowest level in recent history.

MGM indicated that it remained confident in the long-term recovery of its business amid the pandemic, but also noted the strong performance of BetMGM, its online gambling business. “BetMGM gained significant market share throughout 2020 while successfully launching in seven new states,” said CEO and President Bill Hornbuckle.

(Below is Investopedia’s original earnings preview, published February 8, 2021.)

What to Look For

MGM Resorts International (MGM), the global resort and casino operator, is coming off one of its most difficult years in recent history. The company’s revenue has plunged, leading to mounting losses and massive layoffs amid the worldwide COVID-19 pandemic.

Investors will be watching to see if MGM can limit the financial damage caused by the pandemic when it reports earnings on February 10, 2021 for Q4 FY 2020. Analysts are expecting the company to report is fourth straight quarterly adjusted loss per share. Revenue also is expected to fall for the fourth consecutive quarter.

Investors will also be focusing on the room occupancy rate of MGM’s properties along the Las Vegas Strip, which usually generate the majority of the company’s revenues. This key metric shows what proportion of a resort’s rooms are being filled by paying guests. Analysts expect the Las Vegas Strip room occupancy rate to be down dramatically compared to the year-ago quarter, but up from the low point in the second quarter.

Shares of MGM have lagged the broader market over the past year. The stock plunged much further than the rest of the market during the coronavirus-induced market crash between late February and late March 2020. It has gradually closed the performance gap with the market, making significant gains since its last earnings report at the end of October 2020. MGM shares have provided a total return of 6.6% over the past 12 months, well below the S&P 500’s total return of 16.6%.

Source: TradingView.

MGM posted an adjusted loss per share of $1.08 in Q3 FY 2020, as revenue plunged 66.0% compared to the same three-month period a year ago. It marked the third consecutive quarter of adjusted losses per share and declining revenue. During the quarter, the company indicated that it planned to lay off 18,000 workers who had been furloughed because of the pandemic. On the bright side, MGM noted in its quarterly press release that all of its properties were open as of September 30, 2020, following pandemic-related closures earlier in the year.

The low point of the year was the second quarter, when MGM first felt the full financial impact of the pandemic. MGM reported an adjusted loss per share of $1.59 while revenue collapsed by 91.0% to just $289.8 million. By comparison, the company generated more than $3.1 billion in revenue in each quarter during FY 2019. Despite beginning to re-open certain properties during the quarter, many of MGM’s properties remained closed.

Analysts expect continued sequential improvements in earnings and revenue in Q4 FY 2020, but still below last year’s levels. Revenue is expected to fall 50.0% compared to the year-ago quarter, leading to a fourth consecutive adjusted loss per share. For full-year FY 2020, analysts forecast an adjusted loss per share of $4.06 as revenue declines 59.2%, the worst performance in either metric in at least five years.

MGM Key Metrics
  Estimate for Q4 2020 (FY) Q4 2019 (FY) Q4 2018 (FY)
Adjusted Earnings Per Share ($) -0.89 0.08 -0.03
Revenue ($B) 1.6 3.2 3.1
Las Vegas Strip Room Occupancy Rate (%) 49.0 89.0 89.0

Source: Visible Alpha

As mentioned above, investors will also be watching the room occupancy rate for MGM’s Las Vegas Strip properties. The company owns 13 resort properties in Las Vegas, including the Bellagio, MGM Grand, Luxor, Mandalay Bay, The Mirage, and Excalibur. MGM’s Las Vegas properties normally generate the majority of the company’s revenue, but those revenues dipped below those generated by its other U.S. properties in Q3 FY 2020. The room occupancy rate, a metric indicating the percentage of a resort’s rooms being occupied by paying guests, highlights the adverse impacts that pandemic-related travel restrictions, resort closures, and shelter-in-place measures have had on MGM’s business.

Prior to the pandemic, the annual room occupancy rate for MGM’s Las Vegas Strip properties was 91.0% in each of the past three years. Only in a single quarter from Q1 FY 2017 to Q1 FY 2020 did the occupancy rate fall below 85.0%, the rate during the fourth quarter of FY 2017. However, in Q2 FY 2020, the occupancy rate for MGM’s Strip properties fell by more than half the annual rate over the past three years to 43.0%. The rate improved only slightly to 44.0% in the third quarter. Analysts expect an occupancy of 49.0% for Q4 FY 2020, and an annual rate of 50.5% for the entire year. MGM’s room occupancy rate is likely to gradually improve as vaccines for COVID-19 are rolled out, but it’s unclear how quickly the occupancy rate will return to its historic highs.