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Unlike other casino operators that tipped their hands to Wall Street in recent weeks about better-than-expected first-quarter earnings, MGM Mirage kept a tight lid on its hole card.
Only Tuesday, when the company announced quarterly earnings that exceeded all predictions, did MGM Mirage officials reveal they were concealing a stacked deck.Advertisement
"We never like to count our chickens before they hatch, but we were feeling pretty good about our numbers in January and February," MGM Mirage President and Chief Financial Officer Jim Murren said.
"Each of our properties had record revenues, cash flows and income. This quarter was the clearest sign that the Las Vegas market is just as robust as it can be."
For the first quarter, which ended March 31, MGM Mirage reported earnings of 87 cents per share, eclipsing the previous company record of 74 cents per share in the second quarter of 2004 and the 70 cents per share earned a year ago.
Wall Street analysts surveyed by Thomson First Call had a consensus earnings prediction of 75 cents per share.
MGM Mirage's earnings followed an announcement by rival Harrah's Entertainment earlier this month that the company expected its earnings per share to be at least 10 cents higher than previous estimates.
Even after the Harrah's preannouncement, some investors remained nervous that foul weather and higher gasoline prices would discourage visits to Las Vegas and dampen first-quarter results at other companies.
Murren said MGM Mirage isn't as dependent on drive-in traffic from Southern California as other operators.
"January was strong for us and we had tremendous baccarat play in February," Murren said.
MGM Mirage 's net income for the company was $111.1 million, a 5 percent increase from $105.8 million a year earlier.
Net revenue rose to $1.2 billion from $1.07 billion.
Murren said Bellagio, which had pretax earnings of $118 million on net revenues of $331.8 million during the quarter, "made more money that any other Strip casino in the history of Las Vegas."
He also said the company's cash flow during the quarter helped to repay $124 million in net debt while providing $108 million for various capital expenditures for future projects.
"MGM Mirage's earnings per share should convince the Street that demand and pricing trends in Las Vegas are powerful," J.P. Morgan gaming analyst Harry Curtis said in a research note.
Goldman Sachs gaming analyst Steven Kent said MGM Mirage was cautious about predicting future earnings.
"Overall, we believe these results will be viewed very positively for MGM Mirage, and the only thing that may slightly disappoint investors is that second-quarter guidance is in line with consensus, not above it," Kent said in an investors comment. "We think the guidance is a relative positive, especially considering concerns regarding the impact of the Wynn Las Vegas opening in the second quarter."
The news sent MGM Mirage stock on an up-and-down swing throughout trading Tuesday with almost 3.1 million shares changing hands. The stock price reached a high of $72.85 before closing at $68.88, down 85 cents, or 1.22 percent.
The earnings announcement was MGM Mirage's last before absorbing the Mandalay Resort Group through a $7.9 billion buyout.
The last piece of that puzzle, moving Mandalay's half ownership of an Illinois riverboat casino into an escrow trust, is expected to be voted on Thursday by state gaming regulators. If approved, MGM Mirage could close the Mandalay transaction by Monday, Murren said.
"What's exciting is the Mandalay revenue story." Murren said. "The Mandalay folks do a lot of things right and there is an exciting opportunity to continue to improve our revenues."
In a separate announcement, the company said its joint venture in the Chinese gaming enclave of Macau was granted a subconcession for the hotel-casino, and the waterfront site for the project was approved by the city's government.
MGM Mirage said it will build the MGM Grand Macau, a $975 million hotel-casino in conjunction with Chinese businesswoman Pansy Ho.
Construction on the property, which is next to a site Wynn Resorts Ltd. is developing, is expected to start in the next few months with completion expected in 2007. The resort will include 600 rooms and a casino with 300 table games and 1,000 slot machines. About 50,000 square feet is available for future expansion.
"While our focus is on our initial project, both MGM Mirage and Ms. Ho believe in the strength and long-term potential for growth in Macau, and we expect to jointly develop other projects in the Macau marketplace," MGM Mirage Chairman and Chief Executive Officer Terry Lanni said in a statement.
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