MGM Resorts (MGM) Stock Declines After Macau Region Posts 37% Drop in Revenue

NEW YORK (TheStreet) -- MGM Resorts International (MGM) shares are down 2.18% to $19.61 in afternoon trading on Monday as the Macau gaming region in China reported its twelfth consecutive month of revenue declines.

Revenue in the only licensed and legal gambling oasis in China was down 37% year over year in May to $2.5 billion from $4.7 billion a year ago.

The fall in revenue was in line with analysts expectations of a 38% decline for the month.

The consistent decline in revenue is a result of wealthy gamblers in the country steering clear of the region amid a Chinese government statewide crackdown on corruption.

The Macau Gaming Inspection and Coordination Bureau also reported that a cigarette ban in casinos as well as currency headwinds are also playing a part in the region's contraction.

The falling revenue affected the entire gaming sector today as Las Vegas Sands (LVS) shares are down 1.8% to $49.92, while Wynn Resorts (WYNN) shares are declining 1.96% to $98.71.

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 growth in earnings per share, increase in net income and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself."

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

  • 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 two years. 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 -$0.35 in the prior year. This year, the market expects an improvement in earnings ($0.51 versus -$0.33).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 65.5% when compared to the same quarter one year prior, rising from $102.65 million to $169.85 million.
  • 37.74% 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 7.28% trails the industry average.
  • Net operating cash flow has decreased to $175.65 million or 39.59% 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.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. 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.
  • You can view the full analysis from the report here: MGM Ratings Report

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