EARNINGS PREVIEW: Casinos Hurt By Recession, New Competition
30 Janeiro 2009 - 6:51PM
Dow Jones News
TAKING THE PULSE: The recession has turned the cards cold for
casino operators, especially those in tourist destinations. Holding
an edge are companies operating in regional casino markets, where
people can place bets without travel and hotel costs.
Gambling revenue in Las Vegas fell 9% for the first 11 months of
2008. In Atlantic City, N.J., casino revenue dropped 7.6%, making
2008 the second down year in a row after gains every year since
gambling was legalized in 1978. Companies with major operations in
both cities have been forced to take aggressive actions to add
liquidity. They also face more competition as new properties still
under development open. But some projects have been shelved for the
time being amid the economic woes.
Once seen as an offset for U.S. weakness, Macau, has run into
its troubles. Gambling revenue there rose 2.6% in the fourth
quarter from a year earlier but fell 7.3% from the previous
quarter, the city's Gaming Inspection and Coordination Bureau, as
the Chinese government last fall further tightened restrictions on
mainland visitors entering the fast-growing island resort.
COMPANIES TO WATCH:
Penn National Gaming Inc. (PENN) - reports Feb. 5
Wall Street Expectations: Analysts polled by Thomson Reuters
project earnings of 25 cents a share on revenue of $571.9 million.
A year earlier, Penn National reported net income of 36 cents on
revenue of $585.8 million.
Key Issues: The operator of 19 casino and horse-racing
facilities in 14 states and Ontario benefits from being in a
variety of smaller markets, although the recession has damped
earnings. Penn National, which walked away with $1.48 billion in
investments and a breakup fee when its proposed $6 billion
leveraged buyout fell through in July, has said it plans to buy
casino assets.
Boyd Gaming Corp. (BYD) - reporting date to be announce
Wall Street Expectations: Analysts are looking for earnings of
14 cents a share on revenue of $424 million, down from 35 cents and
$478.6 million, respectively.
Key Issues: As one of the oldest Las Vegas gambling companies,
Boyd's customers include many locals, who are struggling with
declining home values and job losses. Also a partner with MGM
Mirage (MGM) in Atlantic City's Borgata, Boyd faces new competition
in both markets. The company has delayed indefinitely its $4
billion-plus Echelon Place project in Las Vegas and has been using
credit lines to repurchase senior notes at a discount.
Wynn Resorts Ltd. (WYNN) - reporting date to be announced
Wall Street Expectations: The company is seen earning 53 cents a
share on revenue of $735.4 million. A year earlier, Wynn reported
net income of 57 cents on revenue of $711.3 million.
Key Issues: Wynn's new $2.3 billion, 2,000-room Encore
hotel-casino, attached to the three-year-old Wynn Las Vegas on the
Strip, opened just before Christmas and a 400-room expansion to
Wynn Macau will open at the end of this year. The company raised
$350 million in a stock offering in November and has one of the
best balance sheets of the major casino operators because it has
been cautious about developments.
MGM Mirage (MGM) - reporting date to be announced
Wall Street Expectations: Analysts anticipate earnings of 22
cents a share on revenue of $1.76 billion. The prior year's net
income was $2.85 a share, which included a $2.33 gain from selling
50% of CityCenter, and revenue of $2.11 billion.
Key Issues: MGM Mirage, which has a big presence on the Las
Vegas Strip, has been cutting costs aggressively. It also amended
its credit line, sold $750 million in debt and agreed to sell
Treasure Island in Las Vegas for $775 million. The moves come as it
cuts costs at the giant CityCenter project on the Strip, which will
include some 4,000 rooms. It will also take a $1.2 billion
write-down related to its 2005 purchase of Mandalay.
Las Vegas Sands Corp. (LVS) - reporting date to be announced
Wall Street Expectations: Analysts forecast earnings of 4 cents
a share on revenue of $1.16 billion. A year earlier, Sands reported
net income of 11 cents on revenue of $1.05 billion.
Key Issues: The company, best known for the Venetian resort in
Las Vegas, has laid off workers, eliminated management bonuses and
suspended construction on projects in Macau and Las Vegas as
billionaire owner Sheldon Adelson injected $1 billion into Sands.
The company said in early November it would likely be in violation
of debt covenants. It subsequently raised $2.1 billion, with nearly
$500 million of that coming from Adelson.
(The Thomson Reuters estimate and year-ago net may not be
comparable due to one-time items and other adjustments.)
-By Kathy Shwiff, Dow Jones Newswires; 201-938-5975;
kathy.shwiff@dowjones.com
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