MGM MIRAGE to report 3Q earnings Thursday

Nov 4, 2009 11:46 PM
Staff & Wire Reports |

MGM MIRAGE (MGM) is to report its third-quarter financial results before the market opens Thursday. Below is a summary of key developments and analyst opinion related to the period.

Its current project, the $8.5 billion CityCenter complex on the Las Vegas Strip, is touted as the most expensive privately financed project in U.S. Most of that project is scheduled to open next month.

MGM MIRAGE said last month that it would take a $955 million hit to its third quarter earnings to reflect the falling value of CityCenter. MGM MIRAGE said its 50 percent stake was worth $2.44 billion as of Sept. 30. The 67-acre project is a joint venture between MGM MIRAGE and Dubai World, the investment arm of the Persian Gulf state.

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MGM MIRAGE had to reassess itself after it cut prices on nearly 2,400 condos to parallel a decline in the Las Vegas real estate market. The units first went on sale in January 2007.

The same day, billionaire investor Kirk Kerkorian, MGM's largest shareholder, said he was exploring partnerships and other options for his 37 percent stake in the company. He said the value of MGM MIRAGE and CityCenter was not reflected in the market price of the company's stock.

MGM MIRAGE CEO Jim Murren told The Associated Press at the time that Kerkorian's investment firm, Tracinda Corp., has a long history of capitalizing on situations where investments are undervalued.

Murren said he didn't know what Kerkorian's intentions were, but he believes the announcement signaled that Kerkorian planned to take a more active role to try to increase shareholder value.

BY THE NUMBERS: Analysts surveyed by Thomson Reuters expect MGM MIRAGE to lose 8 cents per share on $1.48 billion in revenue, compared with income of 22 cents per share on $1.79 billion in revenue during the same quarter last year.

ANALYST TAKE: Janet Brashear of BernsteinResearch said when MGM MIRAGE announced it was cutting prices on the condos that the cuts were on the low end of her forecast, but likely enough to entice some buyers to take the offer rather than lose most of their deposit.

But Brashear said many buyers still don't have mortgages and will have a tougher time getting them as banks hesitate to lend in Las Vegas.

"We might expect a second offer to follow for a portion of the buyers where MGM provides mortgage financing," she said.

WHAT'S AHEAD: MGM MIRAGE will give an update on CityCenter as it puts the finishing touches on the complex before its December opening. Aria, the largest resort on the site and the only building with a casino, opens Dec. 16.

But investors will likely want Murren's insights into what Kerkorian might do with his stake after CityCenter opens.

Analysts are also likely to ask about CityCenter bookings, including its room rates and convention business. Many believe CityCenter's addition of rooms to the Las Vegas Strip will depress room rates for everyone - especially other properties. But company officials have said repeatedly that they believe CityCenter will help Las Vegas tourism rebound and benefit everyone.

STOCK PERFORMANCE: MGM MIRAGE's stock price is down from its 52-week high of $16.89, and was trading at $9.28 Wednesday afternoon. The shares closed the third quarter at $12.04.

Las Vegas-based MGM MIRAGE, the world's second-largest gambling company by revenue, owns and operates 16 casinos in Nevada, Mississippi and Michigan. It also has 50 percent investments in four other properties.

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