GM Resorts International (MGM) has reported its Q4 earnings. The casino giant stock started the day off in the red following the news but has since made a strong recovery. In this column, we discuss the performance of the name. Further, we offer our thoughts and projections for the stock here in 2018.
MGM stock is priced at over 30 times trailing earnings, but the growth trajectory of the name partially justifies this pricing. That said, the stock is still about four points off its 52-week highs:
Source: Yahoo Finance
We believe that the performance of the name, in conjunction with a robust economy that has left people with higher discretionary income suggests the outlook of the name is strong. This was reflected in 2017.
The company had a strong Q4. Net revenues increased 5% over the prior year quarter at MGM’s domestic resorts came in at $1.9 billion but decreased 3% on a same-store basis, excluding contributions from MGM National Harbor. Excluding Monte Carlo and MGM National Harbor, net revenues decreased 1% compared to the prior-year quarter. Factoring in expenses, operating was $305 million at MGM’s domestic resorts, a 2% decrease over the prior-year quarter. What about earnings?
Diluted earnings per share for the fourth quarter were $2.42, including a non-recurring, non-cash income tax benefit of $2.52 due to enactment of U.S. Tax Reform at the end of 2017, compared to diluted earnings per share of $0.04 in the prior-year quarter. This is a positive. Net income attributable to MGM Resorts was $1.4 billion, including a non-recurring, non-cash income tax benefit of $1.4 billion due to U.S. Tax Reform, compared to $25 million in the prior-year quarter.
What is more, Adjusted Property EBITDA increased 1% over the prior year quarter to $496 million at domestic resorts, but decreased 3% on a same-store basis. Excluding Monte Carlo and MGM National Harbor, Adjusted Property EBITDA increased slightly compared to the prior-year quarter. Same-store Adjusted Property EBITDA margin was 26.9% at domestic resorts, compared to 27.0% in the prior-year quarter. However, it was 27.5% excluding Monte Carlo and MGM National Harbor.
We want to point out that MGM China performed well. It had operating income of $43 million compared to $72 million in the prior-year quarter. While this decline may seem worrisome we are encouraged by Adjusted EBITDA of $147 million, a 7% increase compared to the prior year quarter; and a 25% increase compared to the third quarter of 2017.
For the year 2017
One quarter is tough to look at alone so it is best to examine the whole year. For 2017, consolidated net revenues were $10.8 billion and domestic resorts net revenues were $8.3 billion, an 18% increase over the prior year at the MGM’s domestic resorts and a 2% increase on a same-store basis. Operating income was $1.8 billion at the MGM’s domestic resorts while Net income attributable to MGM Resorts was $2.0 billion. compared to $1.1 billion in the prior year. Let us not forget friendly shareholder policies, as MGM returned $580 million to shareholders through buybacks and dividends during 2017.
Looking to 2018
While 2017 was strong, where are we going in 2018? We expect continued growth. On the top line, we are aiming for 10-15% growth in revenues to $11.8 to $12.4 billion. We also expect domestic resorts to see strong same-store growth, while MGM China should benefit from a continued strong middle class. As for earnings per share, we are targeting earnings of $1.46 to $1.95. All things considered, it is a buy on pullbacks.
Note: This article first appeared on our partner site, TalkMarkets.com