Boston, MA 08/05/2014 (wallstreetpr) – As MGM Resorts International (NYSE:MGM) reports its 2Q2014, Macau is on high alert in the sense that the revenue from the gambling hub will be an important metric to keep an eye on in the upcoming report. Multinational casino operators have had all the good reasons to do business in Macau, but there are also teething problems that they have learnt and have to deal with to get their businesses going.
The recently concluded FIFA World Cup event in Brazil and labor issues are some of the problems that are likely to impact MGM Resorts International (NYSE:MGM)’s revenue in Macau.
Slowed down betting in Macau
Starting with the World Cup event, big gamblers took their money to Brazil to bet on the games and that means that casino spending in Macau likely reduced in 2Q. However, if that is reported in the upcoming earnings release, it would be short-lived in the sense that money will likely return to where it was now that the World Cup games are done with.
Labor cost
The more serious issue for MGM Resorts International (NYSE:MGM) in Macau is the labor concerns. First, Chinese authorities only allow hiring of locals to work in casinos in Macau. That law has caused problems for operators because they can’t get enough of the labor they require. As if that is not a problem enough, operators in Macau are faced with high labor costs that analysts expect to reflect in their earnings this month and even in the future. The companies are not only forced to bid highly for workers, but the workers are also demanding bigger pay, which means that labor expenses are a cause for concern for MGM Resorts International (NYSE:MGM) and its peers in Macau.
Earnings estimate
As such, analysts expect MGM Resorts International (NYSE:MGM) to announce weaker earnings in 2Q. They expect the company to post earnings of 12 cents a share on revenue of $2.6 million. Although the figures will be above the like quarter last year, they will also be far removed from the previous quarter’s numbers and reveal a slowdown in earnings and revenue growth.
