MGM Resorts International (MGM -5.01%) just posted its all-time highest revenue per quarter. While the impressive revenue number beat analyst estimates, the company's overall earnings came in below expectations.

With its stock still more than 28% below its November 2021 highs, let's take a look at MGM's third-quarter earnings and future outlook to determine whether this casino stock is a buy.

A record-setting quarter

Thanks to a remarkably strong sales quarter on the Las Vegas Strip, MGM's Q3 revenue of $3.4 billion marked a 26% increase year over year. And that includes a 70% decline in revenue from MGM China, which is still impacted by COVID-19-related closures and restrictions.

Also worth noting, it was the second straight record-setting quarter for MGM, which enjoyed a banner Q2 of this year. Confirming more positive momentum, the company boasted new third-quarter records for revenue and adjusted property earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR).

Calling it "the best quarter in our Las Vegas Strip history," CEO Bill Hornbuckle attributed the strong performance to MGM's appeal, both as a vacation destination and meeting place. Not only is convention business a steady pillar of revenue for MGM, it is regarded as an indicator of future performance. With the longest lead time for MGM, the convention segment provides "visibility into the future," according to Hornbuckle. 

Outdoor meeting space for conventions at MGM resort in Las Vegas.

Image source: MGM Resorts International.

Since the convention business is on pace with management's goal of a 19% room mix (that's the portion of rooms occupied by convention guests), this could be a sign of good things to come for MGM. And the average daily rate (ADR), or the average revenue earned per day for each occupied room, is increasing. Another major driver of MGM's record Q3 was occupancy, which reached 93% for the quarter -- the highest it's been since the pandemic hit.

Higher operating costs and narrowed margins

But revenue alone doesn't tell the whole story, especially considering inflation, rising costs, and the resulting price increases for MGM. The company endured an operating loss of $1 billion compared with an operating income of $1.9 billion during the same period last year.

A one-time expense of $1.2 billion related to new gaming laws in Macau was primarily to blame and took a major toll on revenue for the third quarter. But even without the expense, MGM's operating income would still have seen a nearly 90% drop year over year.

CFO Jonathan Halkyard commented how "unusual margin items" and labor costs in MGM's regional segment also impacted profitability in the third quarter, along with higher advertising expenses. "Keenly focused on margins," Hornbuckle and his team believe that MGM's profit margin will only improve from this point forward.

Fortunately for MGM, the company avoided paying higher utility costs during the third quarter, unlike Caesars Entertainment (CZR -5.02%). When asked about higher utilities during the Q3 earnings call, Halkyard replied, "Our energy costs are largely bought through the end of 2023. So, we didn't suffer any meaningful increase there."

Looking ahead

Optimistic about the remainder of 2022, MGM believes a fundamental shift in consumer preferences from goods to experiences, such as Las Vegas' world-renowned entertainment, will greatly benefit the city's hospitality industry. 

The company is also making continued progress with BetMGM, its online sports betting business. After introducing BetMGM to the Kansas market during the third quarter, the company plans to next add Massachusetts, Ohio, and Maryland to its online sports betting portfolio. With a 29% iGaming market share, BetMGM claims the top spot for U.S. online sports betting.

That, combined with strong domestic bookings well into 2023, make MGM's longer-term outlook appear promising. The company reports "outsized strength" in its luxury resorts where "pricing remains robust," and it observed its best hotel revenue month ever in October.

Is MGM stock a buy?

MGM stock is down roughly 28% down from its highs late last year. If current tailwinds continue for this Las Vegas mainstay, the stock's performance should soon follow the company's. With that in mind, I consider MGM Resorts International stock a buy at its current price.