Why MGM Resorts (MGM) Stock Is Higher This Morning

NEW YORK (TheStreet) -- Shares of MGM Resorts International (MGM) are up 3.74% to $23.88 in pre-market trade after the owner and operator of casino resorts reported 2014 first quarter earnings.

The company said diluted earnings per share was 21 cents, an improvement compared to diluted earnings per share of 1 cent a year ago. 

Consolidated net revenue was $2.6 billion, a 12% increase over the prior year first quarter.

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Consolidated casino revenue increased 13% compared to the prior year quarter.

Adjusted property EBITDA was $682 million compared to $574 million, a 19% increase compared to the prior year quarter.

The company's wholly owned domestic resorts earned Adjusted Property EBITDA of $403 million, a 12% increase compared to the prior year quarter.

MGM China's adjusted EBITDA was a record $241 million, a 33% increase compared to the prior year quarter, including $16 million of branding fee expense in the current quarter versus $13 million in the prior year quarter.

TheStreet Ratings team rates MGM RESORTS INTERNATIONAL as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate MGM RESORTS INTERNATIONAL (MGM) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 4.8%. Since the same quarter one year prior, revenues slightly increased by 9.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 96.80% and other important driving factors, this stock has surged by 88.41% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • 36.13% is the gross profit margin for MGM RESORTS INTERNATIONAL which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -1.52% is in-line with the industry average.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, MGM RESORTS INTERNATIONAL's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio is very high at 3.18 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, MGM's quick ratio is somewhat strong at 1.07, demonstrating the ability to handle short-term liquidity needs.
  • You can view the full analysis from the report here: MGM Ratings Report
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