Will MGM Resorts (MGM) Disappoint This Earnings Season?

MGM Resorts International (NYSE:MGM) is scheduled to report third-quarter 2017 numbers on Nov 8, before the opening bell.

Last quarter, the company surpassed the Zacks Consensus Estimate for earnings owing to an improvement in revenues. Also, MGM Resorts has a decent earnings surprise history.

Evidently, the company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with an average positive surprise of 161.64%.

MGM Resorts International Price and EPS Surprise

MGM Resorts International Price and EPS Surprise | MGM Resorts International Quote

However, the Zacks Consensus Estimate for third-quarter earnings of 33 cents reflects a year-over-year decline of 43.1%.

Also, a look at the company’s price performance shows that it underperformed the industry. Shares of MGM Resorts have gained around 2.8% in the last six months, underperforming the industry’s growth of 15.6%.

Will the upcoming earnings release give a boost to MGM Resorts’ stock? Well, this depends largely on whether the firm is able to post a beat in the third quarter.

Our quantitative model predicts that MGM Resorts does not have the right combination of two main ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

Zacks ESP: MGM Resorts has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: MGM Resorts has a Zacks Rank #4 (Sell).

As it is we caution you against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors Likely to Affect Q3 Results

Per the Macau Gaming Inspection and Coordination Bureau, gross gaming revenues increased in all the three months of the quarter, thereby continuing the revival in Macau. This, in turn, is likely to boost revenues at MGM China in the third quarter.

Despite significant improvement in the VIP market, the company’s VIP business has been largely struggling and this may weigh on MGM China’s results. Increased competition from new openings in Cotai may further hamper the company’s market share and business in the quarter and result in underperformance at MGM China.

Meanwhile, higher demand at its properties in Las Vegas on the back of improving employment rate trends and increasing tourism numbers in the region are expected to propel results. However, higher-than-normal table games hold and solid revenue per available room (RevPAR) growth at Las Vegas Strip resorts in prior-year quarter is set to provide tough year-over-year comparisons in the third quarter.

Moreover, higher than anticipated disruption at Monte Carlo as the property undergoes its transformation to Park MGM is likely to hamper results. In fact, the Zacks Consensus Estimate for the property’s revenues is pegged at $68 million, reflecting a decrease of 6.8% on a year-over-year basis.

Nevertheless, given its strong event calendar, the company expects Las Vegas Strip revenues in the third quarter to increase slightly, with its strip RevPAR expected to improve 2-3%. Additionally, the diversification of its resort portfolio and non-gaming options is likely to boost the top line. Notably, the consensus estimate for the quarter’s revenues is pegged at $2.77 billion, reflecting a year-over-year increase of 10.2%.

Stocks to Consider

Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Take-Two Interactive Software, Inc. (NASDAQ:TTWO) has an Earnings ESP of +3.97% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Walt Disney Company (NYSE:DIS) has an Earnings ESP of +1.37% and a Zacks Rank #3.

Extended Stay America, Inc. (NYSE:STAY) has an Earnings ESP of +0.44% and a Zacks Rank #3.

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