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Strike Averted: Atlantic City Casinos Strike Deal with 4,500 Workers

Story Highlights

Fears of a strike and loss of business in the peak season compelled casino players, including MGM Resorts and Caesars Entertainment, to reach a deal with the Atlantic City workers’ union, LOCAL 54.

The casino industry and the casino lovers breathed a sigh of relief on Thursday after four prominent players in Atlantic City averted a strike by the workers’ union scheduled for the 4th of July weekend. The news also holds importance, as the casino industry is among the biggest employers and drivers of economic development in this resort city of New Jersey.

UNITE HERE Local 54, the largest union for hospitality workers in the Atlantic region, called for the strike in mid-June. It received unanimous support from workers in Caesars, Tropicana, Harrah’s, Borgata, and Hard Rock casinos.

The union said that the workers are paid minimally in these casinos. Instant and high revisions in wages are necessary for the workers, who are struggling to keep pace with the rising cost of living and the persistent impacts of the pandemic on their life.

LOCAL 54 also argued that the casino industry has failed to provide enough employment to meet the growing need of workers. Its employment capacity is still short of 2019-levels, despite revenues increasing 4.9% in January-May 2022 period versus the 2019-level.

Reasons to Rejoice

Now a deal has been reached between LOCAL 54 and MGM Resorts International (NYSE: MGM) and Caesars Entertainment, Inc. (NASDAQ: CZR). While MGM Resorts owns the Borgata casino, Caesars Entertainment is the owner of the Caesars, Tropicana, and Harrah’s casinos. A consolidated performance chart is provided below.

The owners of the four casinos have agreed to the demands of nearly 4,500 casino workers in their employ.

Though the terms of the new contract have not been disclosed, they definitely seem to be in favor of the casino workers.

While addressing the Associated Press, Bob McDevitt, the President of the workers’ union, said, “We got everything we wanted and everything we needed. The workers delivered a contract that they can be proud of for years to come.”

One of the employees of Harrah’s, Ronnette Lark, said, “I’ve been here 24 years and we’ve never gotten a raise like this. We got big raises.”

The union still has to work on a deal with the owners of the Hard Rock casinos. This negotiation is likely to take place on or before July 3 (Sunday).

MGM’s Rating on TipRanks

Following the announcement, shares of MGM Resorts slipped 0.8% to close at $28.95 on Thursday. On TipRanks, the stock has a Moderate Buy consensus rating based on six Buys and seven Holds. MGM’s average price target of $50.62 suggests 74.85% upside potential from the current level.

It is worth mentioning here that MGM Resorts’ revenues grew 73.2% year-over-year in the first quarter of 2022. Adjusted earnings were $0.01 per share versus a loss of $0.68 per share in the year-ago quarter.

A look at the TipRanks Website Traffic tool reveals that the total visits to the company’s website grew 8.7% sequentially and advanced 65.6% year-over-year in the first quarter of 2022. Also, its website traffic has increased 12.77% so far in the second quarter and advanced 40.5% since the beginning of 2022. MGM’s website traffic trend for the quarters underpins its solid top-line prospects.

CZR’s Rating on TipRanks

Shares of Caesars Entertainment were down 4.9% on Thursday. The closing price of the stock was $38.30. The company has a Strong Buy consensus rating based on 13 Buys. CZR’s average price forecast of $98.92 mirrors 158.28% upside potential from the current level.

In the first quarter of 2022, the company’s revenues grew 27.9% year-over-year and its loss in the quarter widened 56.7% to $3.18 per share.

The Website Traffic tool points out that the total footfall on the company’s website decreased 14.3% sequentially in the first quarter of 2022 while the same expanded 65.2% year-over-year. So far in the second quarter, the website traffic has declined 12.04%, compared with the year-ago quarter. However, the traffic on the company’s website has grown 23.98% year-to-date.

CZR’s website traffic data for the second quarter highlights the possibility of weaker top-line numbers on a year-over-year basis.

Conclusion

Higher wages for workers would mean increased expenses for MGM Resorts and Caesars Entertainment, which can bite into their profits. However, the deal between the companies and the union averted both a loss of business during the peak seasons, and high expenses related to the strike.

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