NEW YORK (TheStreet) -- Shares of MGM Resorts International (MGM) fell in morning trading Tuesday after Macau Business Daily estimated that Macau casino operators could suffer a 5% year-over-year revenue decline in the period of June to August.
Morgan Stanley (MS) said Monday that it thinks the revenue decline could continue even further and also noted a labor shortage that could affect the situation.
Macau gaming revenue declined 6.1% year-over-year in August, the third straight month of decline, as China cracked down on corruption. Declining Chinese housing prices also reduced demand from rich VIP customers, according to Reuters.
Gambling revenue from Macau's 35 casinos dropped last month to 28.9 billion patacas, or $3.6 billion, compared to 30.7 billion patacas in the same period one year earlier. Analysts expected a 2% to 6% decline.
The stock was down 3.4% to $22.42 at 11:40 a.m. More than 8.5 million shares had changed hands, compared to the average volume of 7,045,800.
Separately, 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, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- MGM's revenue growth has slightly outpaced the industry average of 5.7%. Since the same quarter one year prior, revenues slightly increased by 4.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- MGM RESORTS INTERNATIONAL reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, MGM RESORTS INTERNATIONAL continued to lose money by earning -$0.33 versus -$3.61 in the prior year. This year, the market expects an improvement in earnings ($0.61 versus -$0.33).
- 37.27% 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. Despite the strong results of the gross profit margin, MGM's net profit margin of 4.08% significantly trails the industry average.
- Net operating cash flow has declined marginally to $512.83 million or 4.21% when compared to the same quarter last year. Despite a decrease in cash flow of 4.21%, MGM RESORTS INTERNATIONAL is in line with the industry average cash flow growth rate of -5.19%.
- Although MGM's debt-to-equity ratio of 2.90 is very high, it is currently less than that of the industry average. Along with the unfavorable debt-to-equity ratio, MGM maintains a poor quick ratio of 0.75, which illustrates the inability to avoid short-term cash problems.
- You can view the full analysis from the report here: MGM Ratings Report
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