MGM Resorts Q2 2021 Earnings Preview: Revenue Surge and Las Vegas Occupancy Recovery Insights

Key Focus: MGM's Las Vegas Room Occupancy Rate and Revenue Rebound

Highlights to Watch

• Analysts forecast an adjusted EPS of -$0.39, a notable improvement from -$1.52 in Q2 FY 2020.
• Las Vegas room occupancy for MGM is projected to increase year-over-year.
• Revenue is anticipated to rise year-over-year for the first time since Q4 FY 2019, though still below pre-pandemic figures.

MGM Resorts International has experienced a boost in consumer demand across its U.S. properties recently, with expectations to return to pre-pandemic operational levels by 2022-2023. The company is also expanding internationally, proposing a $9 billion resort development in Osaka, Japan. Despite optimism, recovery challenges persist due to the global spread of the Delta variant.

Investors eagerly await MGM’s Q2 FY 2021 earnings report, scheduled post-market close on August 4, 2021. Industry analysts predict a significant turnaround with reduced adjusted losses and a substantial year-over-year revenue increase, signaling progress toward recovery.

A critical metric under scrutiny is MGM’s Las Vegas room occupancy rate, reflecting the percentage of rooms occupied by paying guests. As MGM’s largest market, improvements here are a strong indicator of business health. Forecasts suggest a considerable occupancy rise compared to last year, though still below typical pre-pandemic levels.

Over the past year, MGM shares have outperformed the broader market, delivering a total return of 125.6% as of August 1, 2021, compared to the S&P 500’s 35.4%. This performance underscores investor confidence amid gradual recovery.

MGM’s Earnings Journey Through the Pandemic

The pandemic severely impacted MGM’s operations, leading to five consecutive quarters of adjusted losses starting in Q1 FY 2020. The largest loss occurred in Q2 FY 2020, with gradual improvements seen in subsequent quarters. Analysts expect the narrowing loss trend to continue in Q2 FY 2021, marking progress though not yet profitability.

Revenue trends mirror these challenges. From steady growth between 2017 and 2019 (3.9% to 23.0% year-over-year), MGM’s revenue sharply declined starting Q1 FY 2020, with significant year-over-year drops across five quarters. Q2 FY 2021 is expected to reverse this trend with a projected revenue increase exceeding 600% year-over-year, reaching approximately $2.2 billion—still below the $3.2 billion reported in Q2 FY 2019 but a promising recovery sign.

Source: Visible Alpha

Understanding the Importance of Room Occupancy

MGM’s 13 Las Vegas resorts, including iconic properties like Bellagio, MGM Grand, Luxor, Mandalay Bay, The Mirage, and Excalibur, rely heavily on room occupancy rates as a key performance indicator. This metric reflects the proportion of rooms occupied by paying guests and is vital for covering fixed costs such as rent, utilities, and wages.

Pre-pandemic, MGM maintained a robust Las Vegas room occupancy rate of approximately 91% annually through FY 2019. However, FY 2020 occupancy plummeted to 55% due to COVID-19 restrictions. It’s important to note that rooms closed temporarily during the pandemic were excluded from available room counts, meaning actual occupancy rates could have been even lower.

Q4 FY 2020 saw occupancy drop to a pandemic low of 38%, with a slight rebound to 46% in Q1 FY 2021. Analysts now anticipate a significant recovery in Q2 FY 2021, projecting occupancy at 73.5%. While this marks substantial progress, occupancy has yet to return to pre-pandemic norms.

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