MGM Ticks Up As Hornbuckle Downplays Tariff Concerns

MGM Executives Convey Strong Optimism About Las Vegas Visitation During Earnings Call

In a display of resilience, MGM Resorts has expressed confidence in the viability of its operations despite the turbulent landscape shaped by recent U.S. tariffs. During an earnings call on Wednesday, CEO Bill Hornbuckle addressed Wall Street analysts, aiming to alleviate investor concerns following President Donald Trump’s announcement regarding trade policies. The tariffs initially triggered a sharp decline in gaming stocks, including a 9% drop for MGM Resorts on April 3, just hours after the announcement.

However, a reversal in investor sentiment occurred when Trump indicated a pause on reciprocal tariffs against several Chinese imports, allowing major gaming stocks, including MGM, to recover some losses. Hornbuckle highlighted that Las Vegas remains a robust destination, citing a steady increase in domestic flights at Harry Reid Airport, with volumes rising by 2% monthly from April to June. He noted, “We really think we’re in a good place. Las Vegas is resilient, and it has proven itself time and again.”

Earnings Beat Expectations

MGM Resorts showcased a compelling performance in its latest financial results, reporting a consolidated adjusted EBITDA of $637 million, significantly surpassing Wall Street’s expectations of $0.46 per diluted share at $0.69. Revenues reached $4.28 billion, slightly ahead of analyst forecasts of $4.27 billion. Interestingly, while revenue from MGM’s Chinese ventures dipped 2% to $1.03 billion, it still exceeded analyst predictions of $1.02 billion.

Despite a 2% decline in consolidated net revenues for the quarter ending March 31—primarily linked to a 3% decrease among Las Vegas Strip resorts—MGM’s properties achieved a record occupancy rate during this period.

MGM Resorts has characterized its Las Vegas resorts as having a “solid” first quarter, anticipating that April will set new records. #8NN

Challenging Comparisons from the 2024 Super Bowl

The first quarter of 2024 featured the Super Bowl, which hosted unprecedented levels of revenue for local operations. CFO Jonathan Halkyard acknowledged that Strip properties experienced difficult year-on-year comparisons, owing to additional revenue of approximately $65 million generated by the NFL event in February.

Nevertheless, MGM Resorts reported that casino revenue at its Strip properties surged by 8% to $538 million, driven by increased winnings from table games and slots. The company, however, did incur a $37 million impact due to a cybersecurity breach that occurred in September 2023.

Concerns Over Trade Wars and Tourism

U.S. Representative Dina Titus of Nevada recently cautioned that the ongoing trade war could adversely affect tourism. In an opinion piece, she highlighted a 9.7% decrease in visitors to the U.S. in March compared to the previous year, according to data from the National Travel and Tourism Office. MGM reported a noticeable decline in visitation from Canadian tourists in recent weeks.

Hornbuckle also referenced the changing dynamics of fan attendance at MGM events, noting reductions in Canadian fans attending games. Matt Rybaltowski (@MattRybaltowski)

Considering these factors, JMP Securities predicts flat or slightly declining EBITDAR for the remainder of the year. Hornbuckle emphasized that while short-term sales and operational impacts from tariffs have been manageable, MGM is preemptively addressing any potential challenges related to technology and other consumables that might be affected by tariffs.

Strategic Moves in New York

MGM is poised to submit a bid for a license for a downstate casino in New York by the June 27 deadline imposed by the New York Gaming Facility Location Board. Following a significant acquisition in 2019 of Empire City Casino and Yonkers Raceway for $850 million, MGM anticipates a total project investment of around $2 billion in New York.

Hornbuckle noted that the licensing process will require an upfront fee of $500 million, but the company has adjusted its construction plans to minimize potential tariff impacts, particularly concerning steel costs.

Stock Buybacks Highlight Financial Strategy

During the earnings call, stock buybacks emerged as a key topic. In the first quarter, MGM Resorts repurchased 15 million shares for $494 million, continuing a trend that will see them repurchase about eight million shares for $215 million in the second quarter. Since early 2021, the company has repurchased approximately 45% of its shares, with the board authorizing an additional $2 billion stock buyback plan in February.

Halkyard emphasized, “We have seen a tremendous opportunity recently in repurchasing our own shares,” highlighting the strategic alignment of buybacks with MGM’s long-term objectives amid fluctuating stock performance.

Encouraging Developments at BetMGM

MGM Resorts also reported positive developments from BetMGM, its joint venture with Entain. The online gaming platform generated net revenues of $443 million during the quarter, reflecting a robust year-on-year growth of 34%. Notably, online sports betting revenue surged by 68%, positioning BetMGM on the path toward full-year profitability for the first time.

Following the earnings call, MGM’s stock experienced a 4.13% rise, closing at $32.76 per share. Despite this increase, the stock remains down approximately 9% for the year, continuing a trend since the early stages of the pandemic.