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Results from 'Magnificent Seven' duo show cloud revenue boosted by strong AI demand

Margin-Boosting Efforts to Aid MGM Resorts (MGM) Q4 Earnings

Zacks Equity Research

MGM Resorts International MGM is scheduled to report fourth-quarter 2018 results on Feb 13, before the market opens. In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 33.3%.

How are Estimates Faring?

Let’s look at earnings estimate revisions in order to get a clear picture of what analysts are thinking about the company prior to the release. For the quarter under review, the Zacks Consensus Estimate for earnings is pegged at 12 cents, up by a penny over the past 30 days. In the prior-year quarter, the company reported break-even earnings. Revenues are expected to be nearly $3 billion in the fourth quarter, up 13.5% year over year.

Factors Likely to Impact Q4 Results

MGM Resorts’ fourth-quarter revenues are likely to be driven by a sharp increase in sales from China operation as well as domestic operation. The Zacks Consensus Estimate for revenues from domestic resorts is pegged at $2,090 million, reflecting an 8.3% increase year over year. Also, the consensus mark for revenues from operations in China is currently pegged at $643 million, up 17.1% on a year-over-year basis.

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Meanwhile, the company’s solid business model and extensive non-gaming revenue opportunities will continue boosting its performance in the to-be-reported quarter. Moreover, MGM Resorts utilizes various types of technology to maximize revenues and efficiency in operations. In this context, it is worth mentioning that MGM Resorts has an M life Rewards program for customers at domestic resorts. M life provides access to rewards, privileges and members-only events. Management believes that its continued digital endeavors will facilitate high margins, with lesser capital spending.

Despite higher labor costs and expenses associated with technological initiatives, the company’s focus on reducing capital expenses and boosting margins are likely to have favored earnings in the fourth quarter.

What Does the Zacks Model Predict?

Our proven model does not conclusively show that MGM Resorts is likely to beat earnings estimates in the third quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

MGM Resorts has an Earnings ESP of -53.33% and a Zacks Rank #3, which makes surprise prediction difficult.

You can see the complete list of today’s Zacks #1 Rank stocks here.

MGM Resorts International Price and EPS Surprise

MGM Resorts International Price and EPS Surprise | MGM Resorts International Quote

Stocks Poised to Beat Earnings Estimates

Here are some stocks from the Consumer Discretionary sector that investors may consider as our model shows that these have the right combination of elements to come up with an earnings beat in the to-be-reported quarter:

Penn National PENN has an Earnings ESP of +4.76% and a Zacks Rank #3. The company is scheduled to report quarterly numbers on Feb 7.

SeaWorld SEAS has an Earnings ESP of +38.46% and it currently sports a Zacks Rank #1. The company is scheduled to report quarterly numbers on Feb 28.

Hudson HUD has an Earnings ESP of +9.68% and a Zacks Rank #3.

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