MGM Resorts International battled through a tough three months on the Las Vegas Strip to end the third quarter with an overall performance the gaming giant said “exceeded expectations”.
Total net revenues were up 7 percent to just over $3 billion𑁋despite a 6.5 percent decline in the company’s Las Vegas segment to $1.45 billion𑁋beating a Zacks Investment Research survey of analysts by more than $80 million.
Net income and earnings per share also exceeded Wall Street expectations. Net income dipped from $148 million in Q3 2017 to $143 million, but earnings per share was unchanged at 26 cents. The Zacks poll had forecast EPS of 18 cents.
“It was a challenging quarter, and our operating performance exceeded our expectations,” Chairman and CEO James Murren said in a conference call to announce the results. “We’re setting up nicely for the fourth quarter.”
Revenue per available room, a widely cited measure of hotel profitability, was down 3.9 percent on the Las Vegas Strip, but Murren said that will turn positive in the last three months of the year by 1 to 2 percent.
RevPAR declines and falling Las Vegas visitor numbers have had analysts concerned throughout the second half, raising questions about the resort fees, paid parking and other charges that have become embedded up and down the Strip.
Murren, however, maintained that “Las Vegas still represents a value proposition. When you look at the convention business, our (average daily room rates) are much lower than Orlando, Hawaii or Chicago.”
Across the company’s U.S. resorts, operating income was $435 million in the quarter, compared to $545 million in the same period last year, but those results were impacted by $31 million of pre-opening expenses at MGM Springfield in Massachusetts, which debuted in August at a cost of $960 million.
The company said the transformation of the Monte Carlo on the Strip to the Park MGM has disrupted business but the project will be complete by the end of the year.
“This is a new property,” Murren said, “a brand-new property.”
Credit Suisse gaming analyst Cameron McKnight sounded a positive note in a communique with investors after the call.
“Las Vegas is not falling off a cliff and third-quarter Vegas results were better than feared. Convention outlook is very positive, with 20 percent to 30 percent attendance growth in the fourth quarter and 6 percent in the first half of 2019. We think MGM is setting fourth-quarter expectations appropriately.”
Macau also performed well. The company’s MGM China subsidiary grew revenues 37 percent to $606 million, due primarily to the new MGM Cotai, which opened in February. The company’s two casinos in the Chinese territory reported combined net income of $52 million.
