Posted By: Judy Smith
By Deena BeasleyThu Nov 2, 10:59 AM ET
LOS ANGELES (Reuters) - MGM Mirage Inc. (NYSE:MGM - news), the
world's No. 2 casino operator, on Thursday said third-quarter
profit rose a better-than-expected 68 percent on strong
business at its Las Vegas resorts and condominium sales.
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Third-quarter net income rose to $156.3 million, or 54
cents a share, from $93.2 million, or 31 cents a share, a year
earlier.
"Sales were pretty strong in the Las Vegas region. Even
more important, margins improved," said James Hardiman, an
analyst at FTN Midwest Securities Corp.
Excluding a one-time tax gain, MGM earned 52 cents a share,
far above the average Wall Street estimate of 41 cents a share
as compiled by Reuters Estimates.
Revenue rose 5.6 percent to $1.9 billion.
"Our first look at MGM's third-quarter (earnings) and
fourth-quarter outlook is that Vegas operations are excellent,"
JP Morgan analyst Harry Curtis said in a research note.
Las Vegas-based MGM, which acquired Mandalay Resort Group
in April 2005, said it expects net earnings of 40 cents to 45
cents per share in the fourth quarter. Analysts' average
estimate is 48 cents.
Hardiman said MGM's forecast likely equates to a range of
42 cents to 47 cents a share after adding certain costs back
in.
"That's a little beneath what I was looking for ... but
their guidance for the third quarter was 42 cents and they just
blew past that," he said.
Curtis attributed the gap between the company forecast and
Wall Street expectations to discontinued operations and condo
sale proceeds. "Adjusting for these, MGM's guidance is likely 3
cents to 8 cents a share above the Street on a continuing
basis," he said
GAMING REVENUE UP
MGM said third-quarter gaming revenue at casinos open at
least a year rose 5 percent, helped by strong sales from slot
machines and high-end table games.
Same-store revenue per available room, a key measure of
hotel performance, rose 5.5 percent at the Las Vegas Strip
properties.
In addition to its Nevada operations, MGM owns a casino in
Detroit and has a joint venture with Boyd Gaming in the Borgata
hotel-casino in Atlantic City, New Jersey.
At the end of August, MGM reopened its Beau Rivage casino
in Biloxi, Mississippi, which had been closed since last year's
Hurricane Katrina.
MGM said Beau Rivage earned $16 million before interest,
taxes, depreciation and amortization during the 33 days it was
open in the third quarter, compared with $12 million in the
year-earlier period, when it was open for two months.
MGM is constructing its 66-acre Las Vegas CityCenter
project, which has an estimated budget of $4 billion, including
proceeds of $3 billion from the sale of condominiums.
The massive project, along with others planned by companies
including Boyd Gaming Inc. (NYSE:BYD - news), Wynn Resorts Ltd. (Nasdaq:WYNN - news)
and Las Vegas Sands Inc. (NYSE:LVS - news), has led to concerns about
potential oversupply on the Las Vegas Strip.
But Hardiman said, "The rumors of saturation on the Strip
are highly overrated." He said that between now and late next
year, supply will actually contract as properties like the
Stardust, which is being demolished to make way for Boyd's
Echelon Place, are closed.
Longer-term, "supply growth looks normal and demand looks
like it is in great shape," he said.
Overseas, MGM has a joint venture to build a casino in the
Chinese gambling enclave of Macau that is expected to begin
operations in the second half of next year.
MGM shares were down 25 cents at $42.56 in morning trade on
the New York Stock Exchange.
(Additional reporting by Paritosh Bansal in New York)
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