Last week, the third-quarter earnings parade in the gaming group got off to a rainy start, with industry leader Harrah's Entertainment (NYSE:HET) announcing a modest 6% drop in adjusted EPS on Wednesday. The sky darkened even more on Thursday, when Boyd Gaming (NYSE:BYD) posted a much sharper decline amid continued softness in the key Las Vegas locals market.
Today, though, MGMMirage (NYSE:MGM) absolutely walloped Wall Street's best guesstimate. For the period, earnings rose 74% to $0.54 per share -- topping expectations by a full $0.13.
With across-the-board improvements, revenues climbed 5% to reach a company record of $1.9 billion:
|
Department |
Q3 2006 (in millions) |
Q3 2005 |
Percentage change |
|---|---|---|---|
|
Casino |
$844.6 |
$805.3 |
4.8% |
|
Rooms |
$491.5 |
$478.5 |
2.7% |
|
Food and beverage |
$387.0 |
$368.2 |
5.1% |
|
Entertainment |
$125.7 |
$114.9 |
9.4% |
|
Retail |
$75.4 |
$75.2 |
0.2% |
Starting at the top, revenues generated on the casino floor ticked up 5%, thanks to an impressive 22% jump in volume at the baccarat tables -- a favorite of many affluent Asian players. At the other end of the spectrum, players were also busy pulling the slot handles, with upscale resorts like Bellagio, MGM Grand, and Mandalay Bay all reporting double-digit gains in slot revenue.
Unlike other high-end competitors such as Las Vegas Sands (NYSE:LVS), MGM Mirage did not break out its table drop and slot handle individually, or report per-unit daily wins. However, it did note that hold percentage during the quarter was in line with the firm's historical 18% to 22% range.
Along with the stronger gaming results, room revenues also edged slightly higher. Though occupancy at Strip resorts slipped to 96%, average daily room rates climbed from $133 to $140, pushing RevPAR (revenue per available room) about 5.5% higher -- the 13th consecutive quarterly improvement in that key metric.
For the company to squeeze a 74% jump in earnings out of modest top-line growth of just 5%, some improvement on the margin front would be expected. Sure enough, operating margins were up sharply, and property-level EBITDA margins expanded 300 basis points to 33%.
Given last quarter's robust numbers, investors were less than enthusiastic about MGM Mirage's soft outlook for the fourth quarter. Still, the results seemed to counter weak Las Vegas results reported by Las Vegas Sands' Venetian resort. The Strip is particularly vital to MGM's success, considering the nation's gaming capital accounts for around three-quarters of the firm's revenues and operating income.
With conflicting data, all eyes will turn to Wynn Resorts (NYSE:WYNN) early next week. For now, it's still too early to tell whether this quarter's parade will end in a washout.
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Fool contributor Nathan Slaughter owns shares of Boyd, but none of the other companies mentioned. The Fool's disclosure policy is a safe bet.
