MGM Resorts (MGM) is down 8% after the company missed fourth quarter earnings estimates this morning.
Adjusted fourth quarter earnings swung to a profit of $0.11/share as revenue rose 12% to $2.46 billion.
On the call, management noted that it did a poor job of setting expectations on the bottom line as a calendar shift in to October, the timing of one large convention and higher investments in entertainment and advertising weighed on Q4 results. MGM also had unfavorable Hold, meaning the casino got unlucky. All in, this negatively impacted domestic adjusted property EBITDA by $30 million. Still, that metric rose 14%, or 1% on a same store basis, to $493 million.
Revenue per available room (REVPAR) rose 3% at the company's Las Vegas Strip resorts, in-line with guidance. Management said REVPAR would grow 7% in Q1 and called for REVPAR growth and margin expansion in 2017.
Overall, management remained upbeat on the company's outlook.
MGM has a dominant position on the Strip and Las Vegas is poised to outperform over the next several years amid strong visitation, limited supply growth and an expanding convention business. MGM has nine reports on the Strip plus a 50% stake in CityCenter. Sands (LVS -1%) and Wynn (WYNN -3%) each have two resorts on the Strip. The Las Vegas Convention and Visitors Authority expects visitation to grow 1.7% in 2017 after hitting a new record in 2016 (9% above the 2007 peak).
MGM's convention hotel mix was a record at 19% versus 18.5% in 2015. The company expects a new record convention mix in 2017.
Management is confident National Harbor, which opened just outside of Washington DC in December, will be the most profitable casino in the US outside of Las Vegas. It is averaging 22,000 visitors per day.
MGM also initiated a quarterly dividend of $0.11 per share. The company intends to grow the dividend over time.
The stock opened below the narrow range it has traded in since mid-November and has been testing support near the 27 level since the conference call ended.