What You Need To Know
MGM Resorts International (NYSE: MGM) successfully negotiated a new five-year contract with Las Vegas hospitality workers' unions, effectively preventing a city-wide strike. This agreement, covering over 25,000 workers, enhances pay and benefits while also addressing workload concerns.
This outcome follows intensive seven-month talks, culminating in what the Culinary Union deems their most substantial contract in its long history. The deal also includes daily room cleaning and heightened safety measures.
Concurrently, MGM's stock experienced a slight decline, and workers in Detroit continue their strike.
This development occurs amidst broader industry efforts to improve worker compensation, riding on the wave of a labor shortage.
Meanwhile, Caesars Entertainment has secured an agreement providing significant wage increases, referred to as 'historic' by the union.
Wynn Resorts remains in discussions, with a deadline looming.
Despite a post-pandemic tourism recovery yielding high profits for casino operators, Las Vegas visits in September were slightly down from pre-pandemic levels, though room rates have significantly increased.
Why This Is Important for Retail Investors
Stability in Operations: The new labor agreement between MGM Resorts and the unions ensures operational continuity. For retail investors, stability in a company's operations is crucial as it often leads to sustained revenues and potential growth in stock value.
Enhanced Company Reputation: Successfully negotiating with unions to improve workers' conditions can enhance a company's reputation. A reputable company is more likely to attract and retain talent, which can drive long-term performance. This positive reputation can make MGM a more attractive investment.
Stock Price Volatility: The averted strike means there is less risk of negative impacts on MGM's stock price, which is important for retail investors seeking to maintain or grow the value of their portfolios without the disruption of industrial action.
Dividend Security: MGM's move to secure labor peace suggests a focus on maintaining profitability. For retail investors, particularly those who rely on dividends for income, the financial stability of MGM could mean a more secure and potentially increasing dividend yield.
Future Cost Predictability: A five-year agreement provides a predictable labor cost structure. For retail investors, the ability to forecast expenses is essential as it provides a clearer picture of future earnings and company health. Predictable costs can lead to more stable financial planning and investment decisions.
How Can You Use This Information?
Here are some of the investing ideas that can be explored using this information:
Growth Investing
MGM's ability to avoid a strike and ensure uninterrupted operations could be a signal of a growth trajectory, backed by a recovering Las Vegas tourism sector. Investors might anticipate an upward trend in MGM's financial performance and, subsequently, its share price, making it a potential growth stock.
Growth investing focuses on stocks of companies expected to grow at an above-average rate compared to other stocks in the market; learn more in our article titled 'What is Growth Investing?'.
Momentum Investing
The news of the historic deal and the avoidance of a strike could create positive sentiment among investors, potentially driving up the stock's momentum.
Investors might explore momentum investing by capitalizing on the trend of increasing stock prices in the short term, especially if the market responds favorably to the new labor agreement.
Momentum investing rides the wave of existing market trends by buying assets that have shown an upward price trend and selling those in a downtrend.
Read What Others Are Saying
Reuters: MGM Resorts reaches historic labor deal with Las Vegas Union
The New York Times: Las Vegas Unions and MGM Resorts Reach Tentative Labor Agreement
What you should read next:
Investing with Insight
Knowing where to invest is not easy. Bullish and bearish sentiment is always vying for control, and investors like you can very quickly become overwhelmed.
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Some highlights you’ll want to know include:
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