Winter Dampens Monarch 1Q - Analyst Blog
21 Abril 2011 - 8:15AM
Zacks
Monarch Casino & Resort
Inc. (MCRI) reported first-quarter 2011 earnings of nine
cents per
share; shy of the Zacks Consensus Estimate of 15 cents and
unchanged from the year-earlier earnings.
Net revenue declined 3.2% year over
year to $33.3 million and lagged the Zacks Consensus Estimate of
$35.0 million. The underperformance was primarily due to a severe
winter and high snowfall in the Sierra Nevada mountain range.
Additionally, tough comparisons
also remained another cause for concern. Out of the 13 weekends in
the first quarter of 2011, as many as 7 were either threatened or
hit by snow storms that closed major highways to and from the
company’s feeder markets, California. Comparatively, only 3 out of
13 weekends had been affected by snow fall. To make the situation
worse, a rise in expense on a low revenue base led to the quarter’s
shortfall.
Inside the Headline
Numbers
Revenue generated in the casino,
hotel and other operating departments decreased 3.9%, 3.4% and
4.1%, respectively, while revenue generated from the food and
beverage department increased 1.1%.
However, the company experienced an
upside in its cost structure. Casino operating expense increased
1.6% year over year due to increased complimentary food, beverages
and other services provided to casino patrons. As a percentage of
casino revenue, casino operating expense was 40.8%, up 220 basis
points (bps).
Food and beverage operating expense
as a percentage of food and beverage revenue increased 280 bps to
46.5%. Other operating expense jumped approximately $94,000 over the
prior-year quarter primarily due to the purchase of small
equipment and related operating supplies for the spa and salon.
Balance Sheet
Monarch Casino & Resort exited
the quarter with a total cash
balance of $10.3 million and no long-term debt. During the
quarter, the company paid down its credit facility by $6.6 million,
which lowered the outstanding balance to $22.0 million.
Our Take
Following the quarter’s poor
performance, we expect the Zacks Consensus Estimate for Monarch
Casino & Resort to trend down in the upcoming quarter. Monarch
Casino & Resort, through its subsidiary, Golden Road Motor Inn
Inc., owns and operates the Atlantis Casino Resort Spa, a
hotel/casino facility in Reno, Nevada, which features approximately
61,000 square feet of casino space. While big names like
MGM Resorts International (MGM) and Wynn
Resorts Ltd. (WYNN) can depend on Asia to sustain their
growth momentum, Monarch does not have such exposure.
However, the U.S. market and
business at Nevada, especially Las Vegas is also rebounding, which
might influence Monarch’s results in the seasonally strong second
quarter. Monarch currently retains a Zacks #4 Rank, which
translates into a short-term Sell rating. We are also maintaining
our long-term Neutral recommendation on the stock.
MONARCH CASINO (MCRI): Free Stock Analysis Report
MGM RESORTS INT (MGM): Free Stock Analysis Report
WYNN RESRTS LTD (WYNN): Free Stock Analysis Report
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