After gaming companies rode a profitable winning streak quarter after quarter, the cards suddenly seem to have turned cold for most of them. The industry stood its ground against Mother Nature but has since found other concerns more formidable. Despite a recent pullback, high gas prices continue to raise concerns that declining disposable income might slacken travel and gambling demand. More importantly, there have been signs that red-hot growth rates across the industry -- particularly along the Las Vegas Strip -- may have begun to moderate.
It hasn't helped that MTRGaming (NASDAQ:MNTG) recently lowered its third-quarter outlook, citing weaker traffic at its Binion's property in downtown Las Vegas. And riverboat operator Ameristar (NASDAQ:ASCA) has also warned that its take will be somewhat below previous guidance. While these may well prove to be isolated, company-specific issues, third-quarter numbers posted by MGMMirage (NYSE:MGM) Wednesday morning have done little to soothe fears that the string of blowout earnings reports may have come to an end for the time being.
As expected, business lost from closing the Beau Rivage resort in Biloxi, Mississippi -- the repairs are now looking to be more costly than initially suspected -- took a toll on the bottom line, amounting to roughly $0.03. Year-over-year comparisons are also skewed by a $74 million gain booked in last year's third quarter associated with the sale of the MGM Australia. Excluding those items, adjusted earnings from continuing operations rose 36% to $0.38 per share -- missing expectations by $0.03.
While that headline number had many investors cashing in their chips Wednesday morning, the underlying results indicate continued strength. With the addition of former Mandalay-owned properties, net revenues climbed 74% to $1.8 billion. There was also a solid double-digit improvement on a same-property basis. Like last quarter, the real story continues to be revenues generated outside the casino itself. While the tables and slots raked in 49% more cash than a year ago, those produced elsewhere were up 102% -- with same-property increases in those two segments of 4% and 17%, respectively.
Food and beverage, entertainment, and retail revenues were all up sharply. The key department to watch, though, is MGM's hotel business. If the company's rooms are filled with visitors, then everything else should take care of itself.
For the quarter, hotel revenues (which now represent one-fourth of the total) rose 115% to $478.5 million. Recent expansion at the Bellagio has lifted MGM's total room count by 8%, but that increased capacity has quickly been soaked up with strong demand. Occupancy on the Las Vegas Strip remains at a healthy 97%, which combined with a 10% rise in average room rates to $152 per night resulted in a 9% improvement in RevPAR (revenues per available room).
Though EBITDA margins at Strip properties did pull back and RevPAR guidance suggests a modest slowdown, the overall Las Vegas market remains healthy. Convention bookings remain robust, and the latest monthly overall gaming receipts figure rose 13.3% to $487 million. And last week, Station Casinos (NYSE:STN), which caters mainly to local players, blew away analyst expectations. With a bright long-term outlook and valuations across the sector dropping markedly over the past several months, gaming stocks are beginning to look like less of a gamble.
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Fool contributor Nathan Slaughter owns none of the companies mentioned.
