MGM Resorts International, the casino giant whose Strip properties include Bellagio, MGM Grand and Aria, reported its second-quarter earnings today.
Company: MGM Resorts International (NYSE: MGM)
Revenue: $2.39 billion, down 7.6 percent from the second quarter of 2014.
Earnings: $97.5 million, down 11.4 from the same time last year.
Earnings per share: 17 cents, compared to 22 cents during the same time last year.
What it means: Macau continued to be problematic for MGM, as it has been for other casino companies that operate there. Revenue from the MGM China subsidiary dropped 33 percent from last year to $557 million.
MGM had better luck outside China. Among the company’s wholly owned United States resorts, net revenue rose 4 percent from last year to $1.7 billion. Casino revenue rose 5 percent, room revenue rose 6 percent and the company said that the Mayweather-Pacquiao boxing match — held at the MGM Grand Garden Arena May 2 — contributed to a 3 percent increase in food and beverage revenue. But entertainment revenue dropped 3 percent, which MGM attributed to fewer in-house shows than last year.
At the CityCenter complex on the Strip, which MGM runs as a joint venture, net revenue from resort operations grew 3 percent from last year to $312 million.
MGM used today’s earnings report as an opportunity to announce a new profit growth plan, which CEO Jim Murren said has been in development for nearly a year.
The plan is focused on making MGM more efficient, lowering the company’s costs and growing its revenue.
MGM expects the plan to be in full swing by the end of 2017, though it should start showing results this year. It’s expected to produce an extra $300 million annually in adjusted earnings before interest, taxes, depreciation and amortization.
MGM’s real estate has been the subject of much attention this year. The company has recently sold some of its non-Strip properties, and an investment firm pushed a proposal this spring for MGM to adopt a real estate investment trust structure in which one part of the company would own its resorts while another would run them.
While MGM rejected that firm’s specific plan, Murren indicated on a conference call with analysts today that the company may soon take some strategic action regarding its real estate.
“It remains clear that there is a significant value gap between how the market values our assets and what we believe they’re worth,” he said. Hinting at “various great strategic options,” Murren said the company should be able to make an announcement by the end of the year, if not sooner.
But Murren denied recent speculation that MGM is about to sell the Mirage. Though the Vital Vegas blog and the Las Vegas Advisor both wrote last week about a sale of that property, Murren said on the conference call that “the Mirage is not on the market.”
He called the Mirage an “outstanding property” and said its future should become more clear by the end of the year as MGM evaluates its strategic options.
“There’s tremendous amount of interest for Las Vegas real estate. We obviously own the best real estate in Las Vegas, therefore we’re getting the spotlight from potential buyers,” Murren said. “(Chief Financial Officer Dan D’Arrigo) and I meet with anybody that’s qualified, and have for years. And we’ll have more to report on our corporate structure going forward, but to be clear: The Mirage is not being actively marketed at all.”