MGM's hotels charged $1,000 a night on average for the Super Bowl, but the stock suffers a hangover

By Tomi Kilgore

Casino operator's earnings beat expectations, but stock extends pullback from a six-month high after the big game

MGM Resorts International beat fourth-quarter earnings expectations, and said the Super Bowl effect was surprisingly "amazing" for its Las Vegas properties, but the stock continued to suffer from a post-game hangover Wednesday.

Chief Executive Bill Hornbuckle said on the post-earnings conference call with analysts that there had been some uncertainty about how much people would spend at MGM's Las Vegas properties, given that they had to already spend so much to go the game, which was played in Vegas.

"We were always concerned - we do great Super Bowl parties here - will it be the kind of even that will drive, given the additional expense of the tickets, et cetera, et cetera?" Hornbuckle said, according to an AlphaSense transcript of the call. "The answer was hands-down yes, and particularly rooms."

MGM's (MGM) average daily rate for rooms around the Super Bowl was near $1,000. In addition, the company posted three of the top five revenue days ever recorded around the game, as well as near-record event-gaming volumes.

That compares with the ADR for Las Vegas Strip Resorts of $295 during the fourth quarter, which included the inaugural Formula 1 race, and with the ADR of $258 in the first quarter of last year, when the Super Bowl was held in Glendale, Ariz.

"The game weekend is typically a strong event for MGM Resorts, but having the game in town amplified those results dramatically," Hornbuckle said.

MGM's Las Vegas properties include Bellagio, MGM Grand, Mandalay Bay, Luxor and New York-New York.

CFRA analyst Zachary Warring reiterated his buy rating on MGM's stock and his $59 price target, which implies 38% upside from current levels.

"We see MGM as the biggest beneficiary of the Super Bowl and continue to believe shares are undervalued," Warring wrote in a note to clients.

But despite how "amazing" the Super Bowl was for MGM, and despite the company reporting fourth-quarter profit and revenue that beat Wall Street's expectations, the stock sank 6.3% on Wednesday, and has tumbled 9% since closing Monday at a six-month high.

If there were some negatives in the fourth-quarter report, the company said that although the inaugural F1 race during the quarter was "an incredible success," the positive effect was isolated to MGM's premium properties.

Another negative was that while Las Vegas Strip Resorts revenue rose 3% to $2.4 billion, and MGM China revenue rocketed 462% to $983 million, Regional Operations revenue fell 12% to $873 million.

The weakness in regionals was attributed to the effects of the union strike at MGM Grand Detroit, and a decrease in "high-end table volume" at MGM National Harbor near Baltimore.

And Chief Financial Officer Jonathan Halkyard said there was also some "lingering cyber-incident challenges" that specifically impacted the regional portfolio.

Otherwise, quarterly results beat expectations.

MGM reported late Tuesday net income for the quarter to Dec. 31 that rose to $313.5 million, or 92 cents a share, from $284.0 million, or 69 cents a share, in the same period a year ago. Excluding nonrecurring items, adjusted earnings per share of $1.06 were well above the FactSet consensus of 71 cents.

Revenue jumped 21.8% to $4.38 billion, above the FactSet consensus of $4.14 billion, as casino revenue soared 42.3% to $2.20 billion and rooms revenue grew 12.5% to $1.01 billion.

Meanwhile, food and beverage revenue increased 2.4% to $727.9 million and entertainment, retail and other revenue inched up 0.1% to $422.2 million.

In digital, the company said BetMGM met its full-year 2023 targets for both revenue and second-half profitability.

Looking ahead, CEO Hornbuckle said the outlook remains strong. "We're encouraged by the metrics we've seen in our business, including room and rates on the books and in-the-year group attendance and future bookings," he said, as well as a robust event calendar for the Las Vegas.

MGM's stock has gained 6.3% over the past three months, while the S&P 500 index SPX has advanced 10.8%.

-Tomi Kilgore

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02-14-24 1621ET

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