Key Takeaways

  • Analysts estimate adjusted EPS of -$0.86 vs. -$0.45 in Q1 FY 2020.
  • MGM's Las Vegas room occupancy rate is expected to fall YOY.
  • Revenue is expected to decline significantly as the hospitality industry struggles amid the COVID-19 pandemic.

MGM Resorts International (MGM) shed over one third of its global workforce in 2020, a sign of how severely the COVID-19 pandemic has impacted the casino resort operator's business. MGM also reported its first annual loss and revenue decline in at least four years. But as vaccines continue to roll out, MGM is positioning itself to take advantage of pent-up consumer demand for travel and leisure.

Investors will be looking for signs that MGM is beginning to financially turn the corner on the pandemic when the company reports earnings on April 28, 2021 for Q1 FY 2021. Analysts are expecting the company to post its fifth straight adjusted loss per share as revenue declines for the fifth consecutive quarter. The loss is expected to be nearly as big as the most recent reported quarter, which is Q4. But the loss is expected to be markedly smaller than Q2 and Q3.

Investors will also be focused on MGM's Las Vegas room occupancy rate. The room occupancy rate is a key metric showing the number of available rooms that are being occupied by paying guests. Analysts expect the Las Vegas room occupancy rate to fall compared to the year-ago quarter, but to be more than twice as high as it was in the final quarter of FY 2020.

Shares of MGM have dramatically outperformed the broader market over the past year. The stock's performance gap with the rest of the market has widened considerably since the end of October. Increasing optimism over the COVID-19 vaccine rollout in the U.S. helped to boost the stock above pre-pandemic levels earlier this year. MGM's shares have provided a total return of 177.2%, well above the S&P 500's total return of 45.5%.

One Year Total Return for S&P 500 and MGM
Source: TradingView.

MGM Earnings History

The stock dropped following MGM's Q4 FY 2020 earnings report, but was climbing again within a week. The company posted an adjusted loss per share of $0.90, marking its fourth consecutive quarter of losses. Revenue fell 53.1%, continuing a streak of declines that began in the first quarter of the year. MGM said the decline was a result of lower business volume and travel activity due to the pandemic.

In Q3 FY 2020, the company reported an adjusted loss of $1.08 per share as revenue fell 66.0%. It marked the third straight quarter of adjusted losses per share and declining revenue. But it was a definite improvement from the Q2 lows for both metrics. MGM noted that it had modified its operations to adapt to the pandemic environment, including focusing on long-term growth initiatives in sports betting and iGaming.

Analysts expect the losses and revenue declines to continue in Q1 FY 2021. MGM is expected to report its fifth straight quarterly adjusted loss per share. Revenue is forecast to decline 30.1%. It would be the fifth consecutive quarter of falling revenue but the slowest decline since the first quarter of FY 2020. For full-year FY 2021, analysts are currently forecasting an adjusted loss per share of $2.27, which would be the second straight annual loss. However, annual revenue is expected to be 64.5% above last year's pandemic lows.

MGM Key Stats
  Estimate for Q1 2021 (FY) Q1 2020 (FY) Q1 2019 (FY)
Adjusted Earnings Per Share ($) -0.86 -0.45 0.08
Revenue ($B) 1.6 2.3 3.2
Las Vegas Room Occupancy Rate (%)  80.9 88.0 90.0

Source: Visible Alpha

The Key Metric

As mentioned above, investors will also be focusing on the room occupancy rate for MGM's properties in Las Vegas, the company's biggest market. The company owns 13 resort properties in Las Vegas, including the Bellagio, MGM Grand, Luxor, Mandalay Bay, The Mirage, and Excalibur. The room occupancy rate, a metric indicating the percentage of a resort's rooms being occupied by paying guests, is a critical metric used in the hotel industry to gauge a company's ability to cover its fixed costs and generate positive earnings. Many of the costs of running a hotel or resort property are rent or mortgage expenses, utility bills, and wages. These are relatively fixed regardless of the total number of guests. Empty rooms mean lost earnings as the marginal cost of an additional guest is negligible compared to the marginal revenue. MGM's Las Vegas room occupancy rate has been decimated due to the COVID-19 pandemic.

The annual room occupancy rate for MGM's Las Vegas properties was 91.0% for at least each of the three years through the end of FY 2019 before falling to 55.0% for FY 2020. It's important to note that MGM's published room occupancy rate does not tell the full extent of the pandemic's impact on the company's financial performance. MGM says that rooms that were out of service during the year ended Dec. 31, 2020 due to pandemic-related hotel closures were not counted as part of the total available room count. This is not a deliberate attempt to be misleading on MGM's part, but investors should be aware that if those rooms were counted as part of the total available, then the room occupancy rate would be even lower.

MGM's Las Vegas quarterly room occupancy rate reached as low as 38.0% in the final quarter of FY 2020. Now, analysts expect the room occupancy rate for the Las Vegas properties to rise to 80.9%, a big improvement from the previous quarter but still lower than in the year-ago quarter. For full-year FY 2021, the room occupancy rate is expected to rise to 82.8%.