Thursday, Aug. 2, 2018 | 1:49 p.m.
Industry analysts grilled MGM Resorts International executives Thursday after the company forecast weak results for the current quarter because — just like its competitors — it expects fewer scheduled entertainment events and lower room rates in Las Vegas this summer.
Chairman and CEO Jim Murren pushed back. He highlighted the company's casino revenue from its Las Vegas Strip properties and its recent moves to strengthen its position as the legal sports betting market expands in the U.S. But analysts pressed on the summer results.
"Because of what we've seen the last couple of months, we just took a very conservative approach, which we will do forevermore because I don't like calls like this," Murren said toward the end of the call.
The Las Vegas-based company reported second-quarter net income of $123.8 million, compared with $209.9 million during last year's quarter. On a per-share basis, the casino operator said it had net income of 21 cents. Earnings, adjusted for non-recurring costs, came to 26 cents per share.
The results were in line with Wall Street expectations.
Casino operators have told analysts this week they are facing tough third-quarter comparisons because last summer featured stronger convention business and several more entertainment events, including the marquee fight between Floyd Mayweather Jr. and Conor McGregor at the MGM-owned T-Mobile Arena. Events of that size draw thousands of people to the destination.
Competition has pushed operators to drop their room rates.
MGM expects revenue per available room at its Strip casino-resorts to be down 5 to 7 percent during the current quarter. It forecasted net revenue on those properties to also decline by 8 to 10 percent.
Murren told analysts the company is seeing "some discrete pockets of rate pressure" driven by the lower citywide convention mix. He said MGM has adjusted prices and forgone occupancy at properties where it wouldn't get its minimum pricing.
The agency responsible for promoting the destination on Tuesday reported that revenue per available room on the Strip in June came in at $115.36, a 4.3 percent decrease compared with the same month last year. The average daily room rate on the Strip was $125.94, down 1.6 percent.
MGM posted revenue of $2.86 billion in the period, which missed Street forecasts. Five analysts surveyed by Zacks expected $2.99 billion.
Its stock was little changed in Thursday trading.
Analysts at Stifel characterized the company's second quarter results as "uninspiring" and said its forecast for the rest of 2018 will require a downward revision to current consensus estimates.
"Consistent with what we have heard from other operators in the past 24 hours, the (third quarter) period is shaping up to be incredibly soft along the Strip, an observation that was further confirmed by MGM," they wrote.