A visitor to the Rio stops at a slot machine. Harrah's Entertainment, owner of the Rio, reported a 24.2 percent jump in revenues. Photo by THE ASSOCIATED PRESS
After saying earlier it expected 20 percent higher first-quarter earnings, Harrah's Entertainment on Wednesday said increased customer play and the addition of three Horseshoe casinos in the South boosted the company's earnings by 27.1 percent in the quarter.
Las Vegas-based Harrah's, which has 27 casinos throughout the United States, grew its overall revenues 24.2 percent to $1.26 billion in the quarter that ended March 31, as compared with $1.01 billion for the same time period a year ago.
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"Industry-leading capabilities, the accretive acquisition of Horseshoe Gaming and strong operating performances by many properties all contributed to a solid quarter," Gary Loveman, chairman, chief executive officer and president of Harrah's Entertainment, said in a statement.
The company's net income for the quarter was $103.8 million, compared with $81.7 in 2004. Harrah's reported diluted earnings per share of 90 cents, compared with 73 cents per share a year ago.
Analysts surveyed by Thomson Financial were looking for profit of 94 cents per share on sales of $1.25 billion in the latest quarter.
The company's three Southern Nevada casinos -- Harrah's Las Vegas, the Rio and Harrah's Laughlin, reported revenues of $288.5 million, an 11.6 percent increase compared with $258.6 million reported in 2004.
The figures helped the company's Western region to a record first quarter despite a loss in revenues at the company's Northern Nevada properties, which were hurt by severe winter weather in January.
"Our gains in Southern Nevada came on top of a record first quarter in 2004, making the double-digit growth posted by these three properties in this quarter particularly impressive," Tim Wilmott, Harrah's chief operating officer, said in a statement. "This continued strong performance demonstrates the power of our cross-marketing strategy and capabilities, and illustrates the significant growth opportunities to be realized from acquiring four additional properties in Las Vegas."
The three Horseshoe casinos -- in Bossier City, La.; Tunica, Miss.; and New Orleans -- contributed 8 cents per share in earnings during the quarter and helped the company's south-central region increase total revenues 52.5 percent to $275.8 million, compared with $180.8 million a year ago.
"This indicates that earnings accretion from the acquisition is gaining traction as the Horseshoe properties begin to benefit from Harrah's deep customer databases and management systems," said Bear Stearns gaming analyst Joe Greff.
Loveman said Harrah's success incorporating the Horseshoe properties bodes well for its planned $9.4 billion buyout of Caesars Entertainment, expected to be completed by the end of June.
"The progress of the Horseshoe integration is further grounds for optimism," Loveman said. "We plan to apply the lessons learned during this successful process to the pending integration of Caesars. We are making steady progress toward completion of this transaction. We believe we will be able to secure all remaining regulatory approvals in the near future and close in the second quarter."
When Harrah's made its pre-earnings announcement April 6, the company's stock bounced up almost 9 percent. On Wednesday, Harrah's shares closed at $67.05, down $2.10 or 3.04 percent.
Greff said Wall Street, however, is starting to warm up to the idea of a Harrah's-Caesars combination.
"We think Harrah's share price performance will be based on the integration of the Caesars portfolio, which we believe has a lot of low hanging fruit, including cost savings, revenue enhancements in Las Vegas and Atlantic City and international opportunities in Singapore and Macau that are not reflected in the current share price," Greff said.
Greff wrote in an investor's note that the stock still had plenty of upside. He maintained his price target of $83.
"(We're) reaffirming our outperform rating," Greff wrote. "Our positive view is based on, 1) the benefits of the Caesars acquisition, 2) attractive valuation, 3) generally decent operating results across most of its portfolio, and 4) a relative under-appreciation of 1 through 3."
The Associated Press contributed to this report.
GAMING STOCKS FALL AFTER WYNN DOWNGRADE
Merrill Lynch gaming analyst David Anders downgraded shares of Wynn Resorts Ltd. on Wednesday, sending most of the gaming sector downward in trading. Anders said the balance sheet of Wynn Resorts, which is opening the $2.7 billion Wynn Las Vegas next week, is "nearly exhausted."
Shares of Wynn Resorts, which have fallen more than 25 percent in the past month, slid 6.63 percent Wednesday to close at $55.32, down $3.93. More than 5.2 million shares of Wynn Resorts were traded during the session, almost five times the average daily volume.
Anders cut his rating on Wynn Resorts to "sell" from "neutral."'
"Given Wynn's nearly $5 billion in announced capital projects since its initial public offering, we believe the balance sheet is nearly exhausted," Anders wrote in a research note.
Wynn already plans another development, called Encore, on land adjacent to Wynn Las Vegas. The company in March expanded the scope of that project, bringing its estimated cost to $1.4 billion. Wynn has also bid on a potential casino project in Singapore, which is expected to cost about $1 billion.
Other gaming company stocks that fell Wednesday were Boyd Gaming, which closed at $50.62, down $2.48, or 4.6 percent; MGM Mirage, which closed at $67.10, down $1.78, or 2.58 percent; and Las Vegas Sands Corp., which closed at $37.87, down $1.93, or 4.85 percent.
