MGM earnings surprise on faster than expected recovery in Las Vegas

05/02/2013 3:59 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

MGM Resorts International’s (MGM) China unit reported record performance for the first quarter of 2013, the company announced this morning before the New York markets opened. But the big surprise in MGM Resorts International’s first quarter earnings report came from Las Vegas. EBITDA (earnings before interest, taxes, depreciation, and amortization) climbed 12% year over year at the company’s U.S. operations to $361 million.

For the quarter MGM reported earnings of $0.01 a share, which beat Wall Street projections of a 10 cents a share loss for the quarter. Revenue (less promotional allowances) climbed 2.8% year over year to $2.35 billion against the $2.34 billion consensus.

MGM Resorts shares were up 6.3% to $14.67 as of 3:30 p.m. New York time.

For MGM, the largest casino operator on the Las Vegas Strip, a return to growth in the domestic market is more than welcome news. Revenue at wholly owned domestic resorts increased 3% in the quarter from the first quarter of 2012. Revenue from table games climbed 16%. In the conference call the company said it sees the recovery in Las Vegas continuing into the second quarter. RevPAR (revenue per available room) would climb at a 2% rate in Las Vegas in the second quarter from a 1% growth rate in the first quarter of 2013.

MGM China didn’t do too badly either. Revenue climbed to $748 million, a 6% year over year increase. EBITDA climbed 10%. In the conference call the company said its new Cotai Strip casino and hotel complex in Macao is on schedule for an opening in the first half of 2015.

This is pretty much the performance that I was counting on when I added MGM Resorts to my Jubak’s Picks portfolio http://jubakpicks.com/ on May 4, 2012 at $12.43 a share. I am going to adjust my one-year target price slightly to $18.00 a share from $17.50 since I think the turn in Las Vegas is happening a little faster than I expected.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , I liquidated all my individual stock holdings and put the money into the fund. The fund did own positions in MGM Resorts International as of the end of March. For a full list of the stocks in the fund as of the end of March see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/

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