NEW YORK (TheStreet) -- MGM Resorts International (MGM) shares closed trading down 4.97% to $18.83 in intraday trading on Tuesday after the Nevada-based gaming company reached a last-minute deal to avoid a trial over a never completed tower on the Las Vegas Strip.
The trial between the company and the six contractors who were responsible for building the Harmon resort was slated to last a year or more. Jurors reportedly gasped when they heard that a deal had been reached, according to the Associated Press.
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Work on the building was halted in 2008 after inspectors found that the steel used on the bottom half of the building would not be strong enough to support the weight of the full building.
MGM claimed that the flaws in the building were due to contractor negligence while the contractors countered that the company failed to pay the necessary amount for the right steel. The details of the settlement were not made public and neither party publicly admitted fault for the incident.
MGM shares are down 0.27% to $18.80 in after-hours trading today.
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 also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 9.3%. 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 ($0.51 versus -$0.31).
- 35.89% 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 -0.81% is in-line with the industry average.
- In its most recent trading session, MGM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- Net operating cash flow has decreased to $217.84 million or 40.43% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: MGM Ratings Report