NEW YORK (TheStreet) -- Shares of MGM Resorts International (MGM) are lower by 2.78% to $22.38 in late afternoon trading on Tuesday, as casino operator stocks fall following a year-over-year decline in gambling revenue in China's Macau district for October.
Macau revenue dropped by 23% to $3.5 billion, over the same period last year. This was the worst monthly decline the gambling territory has seen since January 2009, when Macau revenue fell 17% year-over-year, the Wall Street Journal reports.
This October was the fifth month in a row revenue in Macau has slumped. Previously, Macau saw five years of uninterrupted growth, the Journal added.
Analysts were expecting a 20% decline in revenue for October, and believe revenue will continue to fall. Analysts attribute a number of factors to Macau's decreasing revenue, but the largest is a recent battle on corruption coming out of Beijing, which has kept a majority of high stakes players away from the tables, the Journal noted.
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 expanding profit margins. 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 9.8%. Since the same quarter one year prior, revenues slightly increased by 0.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- MGM RESORTS INTERNATIONAL has improved earnings per share by 20.0% 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 -$0.31 versus -$3.61 in the prior year. This year, the market expects an improvement in earnings ($0.56 versus -$0.31).
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- 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 2.92 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, MGM has a quick ratio of 0.52, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- You can view the full analysis from the report here: MGM Ratings Report