The dream of a strong Las Vegas recovery took a bit of a hit yesterday when MGM Resorts (NYSE: MGM ) reported less than stellar earnings. The stock proceeded to fall 6% as the company "fails to inspire," according to Reuters.
Revenue reached $2.2 billion in the quarter, but MGM still lost $0.25 per share, narrowing a $0.72 loss per share a year ago. Things are improving, but not as quickly as some would hope.
Lost in Las Vegas
Anyone who expected Las Vegas to be the savior this quarter was dreaming. I've chronicled the weak recovery in the past and considering the added supply, including MGM's own CityCenter, Las Vegas has a long way to go before the casinos are wildly profitable again.
But I actually saw some solid improvement in Las Vegas for MGM, contrary to what some are reporting. On the Las Vegas Strip, occupancy increased 2% to 95% and revenue per available room increased $13 to $117 per night. That helped wholly owned domestic resorts increase adjusted EBITDA to $347.6 million, a 10.2% increase from a year ago.
At CityCenter, MGM's share of operating income was only a $7.7 million loss, a major improvement from a $37.9 million EBITDA loss a year ago.
We're not talking about blowout, hitting-the-buy-button-kind of number, but if room revenue is improving, MGM may be able to pull out of its funk.
Macau dreaming
It shouldn't be any surprise that MGM China was the prize of the quarter for MGM. Adjusted EBITDA increased to $139 million from $84 million a year ago and management has its sights set on Cotai.
MGM has planned a 1,600-room, 500-table, and 2,500-slot-machine resort on Cotai that could open in 2014. I'll call that date optimistic considering MGM doesn't have a land grant yet. MGM's casino would be sandwiched between Las Vegas Sands' (NYSE: LVS ) Sands Cotai Central, Melco Crown's (Nasdaq: MPEL ) City of Dreams, and Wynn's (Nasdaq: WYNN ) new resort. It's a premium location that should help drive MGM when it's built.
Place your bets
The quarter wasn't terrible, but I am still concerned about the $13 billion in long-term debt MGM has on its balance sheet. There are better bets in the gaming industry right now, including any of the three competitors listed above.
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