Goldman Sachs says MGM could be one of biggest share buybacks this year
MGM Resorts International (NYSE: MGM ) has been a consistent buyer of its stock for years, and that trend is expected to continue this year, putting the gaming stock in Goldman Sachs' widely watched buyback basket To have a role to play.
The Bellagio operator is one of five names in the consumer discretionary space and the only one in the casino gaming industry. Bearish 12-month yield buybacks are one of the metrics Goldman Sachs uses to determine which stocks are worthy of inclusion on the list, and MGM ticks the box at 18% -- the best in the consumer cyclical space The second-highest percentage behind General Motors (NYSE: GM ).
Share buyback activity among S&P 500 companies fell 13% last year due to high interest rates and the 1% buyback tax, but this form of shareholder compensation is set to make a comeback starting in 2024.
However, high valuations, rising interest rates and the 1% consumption tax on buybacks may impact margin buyback activity,” Goldman Sachs analysts said.
These factors suggest MGM could be a compelling buyback this year.
MGM has long been committed to share repurchases
The inclusion of MGM in Goldman's buyback basket makes sense because the company has been one of the top buyers of its own stock among S&P 500 members in recent years.
The gaming company repurchased $572 million worth of stock in the third quarter of last year, while also announcing a new $2 billion buyback program when it reported results in November. The operator also said it repurchased $629 million worth of stock in the fourth quarter, bringing its total 2023 value to $2.3 billion.
When MGM reported fourth-quarter results in February, Chief Financial Officer Jonathan Halkyard said in a press release that the gaming company had repurchased $249 million in stock so far this year, bringing its total repurchases in 2021 to $71 One hundred million U.S. dollars. Extension.
MGM's buybacks are significant to investors because stock buybacks are more tax-efficient than dividends and, unlike some rivals, the operator has yet to recover from the quarters that were cut early in the COVID-19 crisis Dividends.
Space for repurchase recovery
Even accounting for the impact of the aforementioned 13% buybacks, cash spending by S&P 500 companies will still rise 4% in 2023 to $3.4 trillion, Goldman Sachs analyst David Kostin noted. The growth was driven by a 10% increase in R&D spending, a 4% increase in dividends and a 34% increase in M&A spending.
Some market observers predict a rebound in buyback activity this year, and there are signs that casino operators other than MGM may join the trend.
Specific to the Excalibur operator, the stock is also a member of the Nasdaq U.S. Buyback Achievement Index, which requires holders to reduce the number of shares outstanding by at least 5% in the past 12 months.
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Source: www.casino.org
