Las Vegas Sun

March 28, 2024

MGM MIRAGE stock rises on quarterly profit report

Weakness in domestic high-roller business over the holidays yielded lower than hoped-for fourth-quarter earnings for Las Vegas Strip casino resort operator MGM MIRAGE today.

Still, the company's stock increased as MGM MIRAGE said it is well-positioned for better returns this year and in coming years, when the economy is expected to improve and the company refines its marketing strategies and kicks off several new property enhancements in Las Vegas.

The company had warned investors early this month that earnings would fall short of previous estimates -- the first time since 1998 that the company had missed earnings forecasts.

MGM MIRAGE Chief Executive Officer Terry Lanni said the company -- hit by an economic slowdown that has already hurt many other business sectors -- is reworking how it attracts domestic gamblers to its properties.

Visitors are still coming to Las Vegas post-Sept. 11 but are spending less due the sluggish economy, he said.

"The fourth quarter proved that we are still in a challenging environment and that the economic recovery in the United States is still a work in progress," he said in a statement. "We are proud of our 2002 results, which produced record earnings for our company in spite of a difficult environment."

In response, Deutsche Bank Securities analyst Marc Falcone told investors today he is maintaining a "buy" rating on MGM MIRAGE stock "although we recognize upside in the shares could be limited until investors get more comfortable with the outlook for Las Vegas."

The company still reported a 65 percent increase in earnings during the quarter, to $39.1 million for the three months ended Dec. 31 from $23.7 million for the year-ago period. On a per-share basis, the company earned 25 cents compared to 15 cents a year earlier.

Excluding certain non-recurring items, earnings were 28 cents per share in the fourth quarter compared to 18 cents per share. After the company's earnings downgrade, Wall Street analysts had expected average earnings of 25 cents per share. Before the warning, analysts had expected the company to earn 43 cents per share.

Non-recurring items included startup expenses of $9.1 million for its investment in the Borgata resort in Atlantic City, online activities, implementation of its Players Club slot card, a restructuring credit of $6.6 million as well as write-downs and impairments of $2.1 million related to assets abandoned or replaced with new construction.

Net revenue in the fourth quarter grew 10 percent from a year earlier, to $533.6 million, primarily due to easy comparisons after the Sept. 11 terrorist attacks. Compared to the 2000 fourth quarter, net revenue was down 4 percent.

Cash flow -- a key indicator of casino performance -- was up 15 percent from a year ago, to $262 million.

Along with other competitors in the casino industry, the company aims to improve its balance sheet by reducing debt and repurchasing company stock.

The company reduced debt by $314 million last year, including $44 million in debt repaid by its half-owned Monte Carlo hotel and casino in Las Vegas. It also bought back 6.4 million shares of common stock for $208 million.

"We are well positioned financially as we move into 2003," MGM MIRAGE Chief Financial Officer Jim Murren said in a statement. "We have a strong balance sheet and will continue to repay debt and invest in our premier properties. We also believe the projects we've decided to invest in -- the Bellagio expansion, Detroit, Borgata, the Cirque du Soleil shows, resort upgrades and improvements in slot technology -- will enhance our portfolio and generate excellent returns on investment."

MGM MIRAGE is a partner with Boyd Gaming Corp. of Las Vegas in the Borgata, which will mark the first new major casino resort in Atlantic City in more than a decade.

During the quarter, the company announced agreements with the Cirque du Soleil acrobatic troupe for two new shows at its New York-New York and MGM Grand properties in Las Vegas. It also announced plans to build a $375 million tower at the Bellagio for upscale tourists. The 925-room tower would feature a spa, retailers, a restaurant and conference space.

In addition, MGM MIRAGE entered into an agreement with luxury condominium developer Turnberry Associates to jointly develop a "condo-hotel" complex behind its MGM Grand resort.

This year, MGM MIRAGE said it would also continue investing in existing operations and construction projects under way, including a new Detroit casino and replacing most of its slot machines with International Game Technology cashless machines.

Shares of MGM MIRAGE rose 28 cents to $26.13 before noon trading on the New York Stock Exchange today.

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