I think investors were really hoping for more" after Nevada reported last week that gambling revenue on the Strip rose nearly 33 percent in February from a year earlier, said Matthew Jacob, an analyst at Majestic Research.
MGM estimates it will report a loss of 22 cents per share in the three months ended March 31, but that includes one-time items such as a 21-cent-per-share gain on extinguishment of debt and a 13-cent-per-share impairment charge related to CityCenter condominiums.
Wall Street analysts, according to Thomson Reuters I/B/E/S, had been forecasting a loss of 21 cents per share. The company said first-quarter revenue would likely be us$ 1.46 billion, roughly in line with the us$ 1.43 billion forecast by analysts.
MGM said operating losses at CityCenter, which opened in December, will total us$ 255 million for the quarter. In the first quarter, "Las Vegas was still very weak ... there were some pockets of strength, like international business, but for the most part it was very challenging," MGM Mirage Chief Executive Officer Jim Murren told Reuters in a telephone interview.
He said booking trends are turning positive and convention business will be up year-over-year in the second half of 2010, with convention booking rates so far up more than 20 percent for 2011.
Jacob noted that Nevada's February gambling total was helped by Chinese New Year, which occurred in January last year, and continued strength in baccarat revenue, a game played mainly by Asian customers.
Looking only at properties open during both the first quarter of 2009 and 2010, MGM said casino revenue is expected to drop some 5 %. On the Strip, revenue per available hotel room fell 8 % from a year earlier, as the extra CityCenter capacity put pressure on room rates at the same time consumer and business demand for travel continues to wane amid the recession. "This does show the difficulty that Vegas is having absorbing CityCenter and the competitive pressure that MGM is going to feel," Jacob said.
The company said its overall operating loss was expected to be about us$ 11 million for the quarter, compared with operating income of us$ 355 million in the same period in 2009.
The casino operator will hold a conference call to discuss its earnings during the week of May 3. MGM's holdings also include gambling resorts in Mississippi and Michigan, and joint ventures in New Jersey and China's Macau. CityCenter is a 50-50 joint venture with Dubai World.
MGM has agreed to sell its 50 % stake in the Borgata resort in Atlantic City after New Jersey regulators raised questions about the suitability of Pansy Ho, MGM's joint venture partner in Macau, where the company is on track to conduct an initial public offering later this year. Murren said MGM plans to begin talks with potential buyers in May.
Shares of MGM Mirage slid 6 % to us$ 14.50 after hours, from a regular-session close of us$ 15.41, which marked a 69 % increase since the beginning of the year.