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Why MGM Resorts Is Rising Today

By Rich Duprey – Aug 5, 2021 at 3:51PM

Key Points

  • MGM Resorts derives most of its revenue and profits from the U.S.
  • It has benefited from the recovery seen in Las Vegas and regional casino markets.
  • Its diminished presence in China has protected its downside during the pandemic.

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The odds have been in the casino operator's favor for some time.

What happened

Shares of MGM Resorts (MGM -2.52%) were rising 7% in afternoon trading Thursday after the global casino operator reported second-quarter earnings that beat Wall Street estimates on the top and bottom line.

So what

The casino industry is still laboring under a diminished outlook because of the pandemic, and with coronavirus variants spreading worldwide, resulting in new lockdowns and mask mandates, it's possible to see a scenario where casinos would be dead money for a period of time.

Gamblers playing roulette.

Image source: Getty Images.

MGM Resorts, however, reported revenue of almost $2.3 billion leading to an adjusted loss of $0.13 per share, stomping all over analyst expectations of a $0.36 per share loss (analyst estimates typically do not include one-time items that companies strip away in their adjusted numbers).

President and CEO Bill Hornbuckle said MGM delivered record adjusted property EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs) in both Las Vegas and its regional markets. Equally important, "Our U.S. sports betting and iGaming venture, BetMGM, continues to outperform as the No. 2 operator nationwide," he said.

Now what

Unlike Las Vegas Sands and Wynn Resorts, which rely almost solely or mostly upon China for more of their revenue and profits, MGM Resorts tilts heavily toward U.S.-based gaming operations. While it does have properties in Macao, they impact its operations much less than they do its rivals.

The resort operator did report MGM China saw a near 900% surge in revenue from the year-ago period, but with the gambling mecca being virtually closed off last year due to strict travel restrictions, it was a low bar to step over.

MGM Resorts is arguably the best positioned world-class casino operator because of its focus on the U.S. coupled with the rise of sports betting. Look for it to continue improving in the quarters to come.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Mgm Resorts International Stock Quote
Mgm Resorts International
$36.38 (-2.52%) $0.94
Wynn Resorts, Stock Quote
Wynn Resorts,
$84.96 (-0.53%) $0.45
Las Vegas Sands Stock Quote
Las Vegas Sands
$47.13 (0.70%) $0.33

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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