Insights

Why MGM Resorts Stock Jumped After Earnings

What happened 

Shares of casino stock MGM Resorts (NYSE: MGM) jumped as much as 5.6% in trading on Thursday after the company reported second-quarter financial results. Shares slipped as the day went on but were still up 2.9% at 2:20 p.m. ET. 

So what 

Revenue jumped 44% versus a year ago to $3.3 billion, and net income was $1.8 billion after a gain related to the deconsolidation of MGM Growth Properties. Adjusted earnings per share were $0.03, and adjusted earnings before interest, taxes, depreciation, amortization, and rent (EBITDAR), which is a proxy for cash flow from resorts, was $920 million.

Analysts were only expecting revenue of $3.0 billion and earnings of $0.24 per share, so on that basis, results were mixed. But investors are clearly valuing the revenue side of the ledger more than earnings right now. 

Management also said they bought back $1.1 billion of stock last quarter, or 8% of all shares outstanding. And the company still has $5.8 billion in cash on the balance sheet. 

Now what 

Las Vegas is hitting on all cylinders right now with revenue of $2.14 billion in the quarter exceeding the same quarter in 2019 by nearly $700 million. This doesn’t account for the acquisition of Cosmopolitan, but still the results are outstanding. 

These results are strong despite Macao contributing only $143 million in revenue and a negative $52 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). If Macao ever comes back, this could be a rocket stock. 

Travis Hoium has positions in MGM Resorts International. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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