MGM Resorts International (MGM -0.05%) posted another record quarter for its resorts on the Las Vegas Strip as the company resumes operations in Macau. Let's look at MGM's fourth-quarter and full-year 2022 performance, and why I think the casino stock remains a buy at current price levels.
Business in China resumes
The fourth quarter marked the fifth straight quarter of record-high adjusted property earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) for MGM's Las Vegas resorts.
Same-resort sales on the Strip, excluding the Cosmopolitan and Mirage, increased 11% year over year while adjusted property EBITDAR rose 6%. Overall, net revenue from MGM's Las Vegas resorts showed a 27% gain year over year, reaching $2.3 billion for the quarter.
According to Chief Financial Officer Jonathan Halkyard during the fourth-quarter earnings call earlier this month, "Demand in Las Vegas remains strong across all segments," fueled largely by MGM's entertainment offerings.
In a more momentous update, CEO Bill Hornbuckle said "Macau is back," boasting of MGM's return to operations in China. He cited "tremendous opportunities for growth" outside of MGM's Las Vegas home turf, led by the Macau region in China.
In general, fourth-quarter consolidated net revenue increased 18% year over year to $3.6 billion, and full-year consolidated revenue gained 35%. While net income attributable to MGM Resorts reached $284 million in the fourth quarter, a substantial 117% year-over-year improvement, it only gained 17% in all of 2022 versus 2021.
MGM is not pursuing full BetMGM ownership
During the fourth-quarter earnings call, Hornbuckle also clarified MGM's decision not to pursue acquiring Entain to gain full ownership of BetMGM. Currently, BetMGM is a 50/50 joint venture between MGM Resorts and Entain, offering sports betting and online gambling across North America.
Investors and analysts alike were relieved to hear of MGM Resorts choosing not to go after Entain or the rest of BetMGM, since it removes some uncertainty from the company's outlook and allows MGM to focus on a highly profitable Macau market.
Although MGM endured a net loss last quarter, current emphasis has shifted to MGM China, where a spike in travel has been observed since the country lifted its COVID-19 protocols early this year.
2023 is off to a good start
Regarding MGM's Macau business, Hornbuckle said, "We are experiencing a rebound in 2023." Guests have returned to MGM's China casinos "in force," he said, just like they did in Las Vegas when COVID restrictions eased there.
According to Hornbuckle, MGM China's combined properties currently make up "the highest-earning businesses" within the company's portfolio. And similar to its Las Vegas resorts, non-gambling entertainment has raised visitor levels, particularly during the Lunar New Year holiday at the end of January.
Although it's early in the year, these results have restored confidence for MGM's management. Hornbuckle anticipates recovery in the Macau market to continue as the year progresses, and he outlined several initiatives to grow market share in the region, saying, "These collective efforts position us for a long-term growth story in Macau."
Why MGM stock is a buy
With its CEO talking about MGM's "year-to-date return to profitability and BetMGM's ongoing improvement in 2023," I think record revenue results will eventually solidify into record profits. If its Las Vegas business continues to accelerate alongside a freshly reopened Macau market, the stock should ultimately reflect that result. For these reasons, I consider MGM Resorts International stock a buy at current price levels.
