- Analysts estimate adjusted EPS of -$0.08 vs. -$0.68 in Q1 FY 2021.
- MGM's Las Vegas room occupancy rate is expected to rise significantly YOY.
- Revenue is expected to rise, but at a slower pace than in recent quarters.
MGM Resorts International (MGM) is slowly recovering from the enormous shock triggered by the COVID-19 pandemic in early 2020. The company has returned to modest profitability and posted strong revenue growth in recent quarters. Even though MGM's business volume has failed to return to pre-pandemic levels, MGM’s board of directors was confident enough in March to approve a new $2.0 billion share repurchase program to return value to shareholders.
Investors will be watching how rapidly MGM is recovering to full financial health when it reports earnings on May 2, 2022 for Q1 FY 2022. Analysts expect MGM to report its first adjusted loss per share in three quarters as revenue rises, but at a slowing pace.
Investors will also focus 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 in Las Vegas, which is MGM's biggest market. Analysts expect the Las Vegas room occupancy rate to rise dramatically compared to the pandemic-depressed level in the year-ago quarter, though analysts also estimate it will be lower than the most recent Q4 period.
Shares of MGM have only slightly underperformed the broader market over the past year. The stock has oscillated between outperformance and underperformance over the last 12 months. MGM's shares have provided a total return of 1.6% over the past year, just slightly below the S&P 500's total return of 1.8% as of April 29, 2022.
MGM Earnings History
MGM reported Q4 FY 2021 earnings that beat consensus estimates. The company's adjusted EPS came in positive for the second straight quarter following six consecutive quarters of adjusted losses per share. Revenue rose 104.7% compared to the year-ago quarter, marking the third straight quarter of growth after five consecutive quarters of declines. The company's results continued to be positively impacted by the removal of largely government-mandated restrictions and an increase in travel.
In Q3 FY 2021, MGM reported earnings that surpassed analysts' expectations. The company posted its first positive adjusted EPS since the final quarter of FY 2019, ending a streak of six straight adjusted losses per share. Revenue expanded 140.5% year over year (YOY), decelerating from the previous quarter's rapid YOY pace of 682.6%, which was off of an extremely low base due to the pandemic. The company said that its results benefitted from the removal of operational and capacity restrictions at its hotels, casinos, and other properties as well as an increase in travel.
Analysts expect MGM's earnings performance to weaken in Q1 FY 2022. They expect the company to report its first adjusted loss per share since the second quarter of FY 2021. Revenue is expected to grow at a robust pace of 68.6%, but significantly slower than in recent quarters as it approaches pre-pandemic levels. For full-year FY 2022, analysts expect MGM to post its first annual positive adjusted EPS since FY 2019. Annual revenue is expected to rise 28.5% to $12.4 billion, about $500 million shy of its pre-pandemic level in FY 2019.
|MGM Key Stats|
|Estimate for Q1 FY 2022||Q1 FY 2021||Q1 FY 2020|
|Adjusted Earnings Per Share ($)||-0.08||-0.68||-0.45|
|Las Vegas Room Occupancy (%)||76.7||46.0||88.0|
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 operates 13 resort properties in Las Vegas, including the Bellagio, MGM Grand, Luxor, Mandalay Bay, 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 was decimated in FY 2020 due to the COVID-19 pandemic. The annual room occupancy rate for MGM's Las Vegas properties was 91.0% in each of the three years starting in FY 2017 through the end of FY 2019 before falling to 53.3% in 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. MGM does not include rooms that were out of service due to pandemic-related hotel closures in its total available room count when calculating the room occupancy rate. 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 room occupancy rate rebounded in FY 2021 amid vaccine rollouts and easing of restrictions. The room occupancy rate was 74.0% for the entire year. The quarterly rate gradually increased from 46.0% in Q1 FY 2021 to 86.0% in Q4 FY 2021. Analysts expect an occupancy rate of 76.7% in Q1 FY 2022. While that is well above the year-ago quarter's rate, it marks a deceleration from the rates recorded in the final three quarters of FY 2021. For full-year FY 2022, analysts forecast a room occupancy rate of 83.8%. That would be the highest level since the start of the pandemic, but still significantly below pre-pandemic levels.
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