MGM Growth Properties LLC Misses Q2 Revenue Estimates

Shares of MGM Growth Properties LLC (MGP) closed flat at $40.67 on August 6, after the casino/real estate business delivered lower-than-expected second-quarter results.

Revenues remained flat year-over-year at $194.34 million, but were a little short of consensus estimates of $197.22 million.

Earnings of $0.28 per share declined from $0.30 earnings per share reported in the prior-year period.

Consolidated Funds From Operations (FFO) came in at $0.53, while adjusted FFO was $0.65 for the quarter. (See MGM Growth Properties stock charts on TipRanks)

MGP to be Acquired by Vici Properties

Last week, MGP agreed to be acquired by VICI Properties (VICI) in a stock-for-stock transaction worth $17.2 billion, including $5.7 billion in debt.

Per the terms of the deal, MGP Class A shareholders will receive 1.366 newly issued shares of VICI for an implied price of $43 per share.

Furthermore, MGM Resorts International (MGM), the majority stakeholder in MGM Growth Properties, will receive $4.4 billion in cash, as VICI plans to redeem the majority of MGM’s VICI units for cash. After this, MGM will retain an operating partnership stake of 12.2 million VICI units, worth $370 million. MGP’s Class B shares, held by MGM, will be cancelled.

The acquisition is expected to close in the first half of 2022, subject to certain regulatory approvals.

MGP CEO James Stewart commented, “As a result of our completed and announced transactions, MGP’s pro-rata rental revenue has nearly doubled from $550 million at IPO to approximately $1.0 billion, our annualized dividends per share increased 44%, and our total shareholder return has more than doubled.”

Following the acquisition and earnings announcement, Truist Financial analyst Barry Jonas downgraded MGP from Buy to Hold with a price target of $43 (5.7% upside potential).

Overall, the stock has a Moderate Buy consensus rating based on four Buys and two Holds. The average MGM Growth Properties price target of $41.40 implies 1.8% upside potential from current levels.