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Why did MGM Resorts’ revenue fall in 4Q14?

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MGM announced its results

On February 17, 2015, MGM Resorts (MGM) reported its results for the fourth quarter and full year ending December 31, 2014. Las Vegas Sands (LVS) released its 4Q14 results on January 28. Wynn Resorts (WYNN) and Melco Crown Entertainment (MPEL) released their 4Q14 results on February 3 and February 12, respectively.

Investors may invest in all of these companies through the VanEck Vectors Gaming ETF (BJK). The Consumer Discretionary Select Sector SPDR Fund (XLY) gives investors a much broader exposure to the leisure industry. MGM comprises ~5% of BJK.

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Revenue

For 4Q14, the net revenue was $2,386 million—down by 5.1% on a year-over-year, or YoY, basis. The decline was primarily due to a 22.4% YoY decrease in net revenue from the Macau operation. This was slightly offset by a 5.1% YoY increase in net revenue from its wholly owned domestic resorts.

On a quarter-over-quarter basis, net revenue fell 4%. Revenue fell 9.5% in Macau. It fell 1.5% at its wholly owned domestic resorts—compared to the prior quarter. Macau’s operations were negatively affected over the last two quarters because of lower VIP gaming activity. It was also affected by a fall in premium mass market participation.

MGM’s consolidated net revenue for 2014 was $10.1 billion—up 3% from 2013. Net revenue from wholly owned domestic resorts was $6.3 billion—a 5% increase compared to last year. MGM China’s net revenue was $3.3 billion for 2014—a 1% decrease from 2013.

Key takeaways from the 4Q14 earnings call

James J. Murren, MGM’s chairman and CEO, said, “…the U.S. consumer is feeling better. Unemployment is at its lowest level in five years. Consumer confidence is at new highs. House prices are recovering. And, of course, energy costs have been cut dramatically. Remember that 70% of our Las Vegas revenues are non-gaming. Consumers are spending more, and this really helps, particularly our core properties. And I can tell you that, for MGM, 2015 is off to a very strong start in Las Vegas.”

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