MGM Shares Rising as Adjusted Results Top the Street's Low Expectations

November 5, 2009 12:14 PM EST

Shares of MGM Mirage (NYSE: MGM) are up more than 2.5% today following the casino's Q3 results, reported this morning. The stock most recently traded at $9.65.

MGM reported a $750.4 million loss amid a write-down related to its CityCenter project. On a per share basis, the loss came out to $1.70. Excluding these charges, however, MGM reported breakeven earnings, actually coming in better than the $0.07 loss the Street had been looking for. Sales during the quarter fell 14% to $1.53 billion, also topping the analyst consensus.

On its conference call, MGM execs highlighted several factors which have recently been weighing on the casino operators stock:

• the company gained international and domestic high-end market share.
  
• gained share of the Vegas convention center. Similarly, business bookings during the quarter returned to "more normal levels". Convention bookings are expected to be even better next year. Further, MGM's CEO noted that convention cancellations slowed "dramatically" during Q3.
  
• called the CityCenter project "perfectly complimentary to its LV business".
  
• MGM is encouraged by improvements within Las Vegas last quarter, but "not out of the woods yet".
  
• "cautiously optimistic" on the Q4 and 2010 outlooks.
  
• seeing a "return to normalcy" on credit facilities and is "in good shape" on bank covenants.
  
• sees FY09 total Las Vegas visitation of about 35.4 million. Sees 2010 Vegas visitation rising 7% and room capacity rising 5%. Sees city-wide occupancy at about 80% next year, but above 90% at its resorts.
  
• MGM's bank lenders have "not fussed at all about us" now.
  
• the Macau IPO could happen as early as 2010. MGM said that it and its partners are "determined to take Macau public".
  
• has taken out $700 million in annual costs.

Responding to the quarterly results, analysts at Goldman Sachs attributed the strong quarter "significant upside at MGM Grand and Mirage". Goldman noted that MGM's seven other properties missed the firm's EBITDA guidance. The firm also pointed out that "while YoY change in Las Vegas RevPAR remains under extreme pressure (-23% in Q3), it was better than -31% in Q2 as room rates have modestly improved." Goldman maintains a Neutral rating and $8 price target on shares of MGM.

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