Luck is on MGM’s Side As Earnings Recover in First Quarter of 2018

After reporting break even earnings in the last quarter of 2017, MGM is showing positive numbers for the first quarter of 2018. In a recent financial report, the multinational hospitality and entertainment company which owns various resorts and casinos in Las Vegas, Mississippi, New Jersey, Detroit, and Maryland, as well as in Macau and Cotai in China, announced a revenue increase of 5.5% to $2.6 billion. This exceeded the forecast made by Zacks Consensus Estimate, which was $2.5 billion. Its net income soared from $24.7 million the previous year to $1.4 billion, or $2.42 per share.

MGM is One Resilient Company

While the numbers seem to show positive outcomes for MGM within the year’s first quarter, this is mainly due to a tax benefit resulting from the tax law passed last December. If this law had not been passed, MGM would have reported a loss of $0.10 per share, as a result of an unfortunate incident on October 1st, 2017, when a gunman from the 32nd floor of one of their properties, Mandalay Bay, shot at the crowd attending a concert below, killing 58 people.

As a result of his unfortunate incident, revenue per available room went down by 4.9% on the Las Vegas Strip, as MGM’s high-end resorts, including Bellagio, MGM Grand Las Vegas, and Mandalay Bay, all experienced lower average daily room rates and occupancy compared with the prior year. But despite the unexpected event in the last quarter of 2017, MGM still reported an impressive annual consolidated net revenue of $10.8 billion in 2017, a 14% growth over 2016.

Luck on MGM’s Side

With online gaming options now conveniently available to those who love to play poker, baccarat, roulette, and slot machines, people now have a ready alternative to land-based casinos, especially with mobile devices like smartphones and tablets which make it so easy to play these casino games practically anywhere. This is certainly a challenge to land-based casinos such as MGM. Moreover, most online casino sites offer very attractive offers to players, making it hard to resist their promos, especially for new users. The sector is very competitive too, which means that online resources abound; is an example of a review site that discusses different online casinos that offer attractive bonuses and free spins.

Even though land-based casinos experienced lower activity during the fourth quarter of last year, MGM was very lucky to have ended the year with positive figures. Table game drop – the volume of play at table games – was $909 million in the fourth quarter, 4.2% lower than the same period in 2016. Fortunately for MGM, this decline was offset by table game win percentage which grew from 23.5% to 25.3%. As for slot machines, even when slot handle was down 5.6% to $3.13 billion, this was offset by slot hold percentage which went up 100 basis points to 8.9%.

Slow and Steady Wins the Race

One of the things that make MGM a great investment is its stability. At its worst period last year, it reported break even earnings. This is proof that this company can withstand economic downturns, and status quo in figures is certainly better than a decline in numbers.

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