March meekness: Gaming stocks sustain losses

March was not a good month for the stock prices of casino companies and slot machine makers.

All 10 of the gaming stocks charted by Las Vegas-based financial consultant Applied Analysis suffered losses in their average daily prices when compared with February. Seven of the 10 declines were double-digit drops.

And, said Applied Analysis principal Brian Gordon, April may not be much better.

"There is so much financial uncertainty in the markets and there are outside factors impacting the gaming sector," Gordon said Monday. "The broader market is down, there have been some questions about the viability of new projects and investors are concerned about the depth of the market today."

Gordon said any quarterly earnings that are released in April covering the past three months could affect the gaming sector. So far, only slot machine giant International Game Technology has set a date, April 17, for its earnings. Also, the release next week of February's monthly statewide gaming revenues also could give the sector either a boost or bring prices down lower.

The national consumer confidence index reached a five-year low in March, which has consumers questioning the overall health of the economy, their employment outlook and the effects of rising costs for goods and services, including food and gasoline, Gordon said. "It will be important to monitor the impacts of consumer perceptions and their impact on leisure travel to Las Vegas."

The Applied Analysis Gaming Index, which takes into account more than 300 market variables and economic indicators, fell 46.57 points to 511.89. In February, the index recorded its first increase since October.

Boyd Gaming Corp. took the hardest hit in March, with the company's average daily stock price falling more than 21 percent compared with February. The three casino operators with a presence in Macau, MGM Mirage, Wynn Resorts Ltd. and Las Vegas Sands Corp., had their average daily stock prices drop between 10 percent and 12 percent.

Falling stock prices were one reason Susquehanna Financial Group gaming analyst Robert LaFleur readjusted his earnings per-share estimates for Wynn Resorts, Las Vegas Sands and Penn National Gaming, another casino operator charted by Applied Analysis.

LaFleur told investors in a research note Monday the challenging Las Vegas market may affect Wynn and Las Vegas Sands casinos.

"For Las Vegas Sands, we have revised our estimate to reflect a slower ramp-up at the Palazzo, a soft near-term Las Vegas Strip outlook, and other adjustments related to nonoperating items," LaFleur said. "The revisions in our Wynn estimates are largely the result of operating performance at Wynn Las Vegas, along with other nonoperating items in our model."

Gordon said there was little news coming out of the Las Vegas market in February. News that did surface wasn't positive. The $3.9 billion Cosmopolitan is facing a foreclosure notice. The Crown project, slated for the former site of the Wet 'n Wild water park on the Strip's north end, may be in trouble. The site is being marketed for sale.

Slot makers did not fare much better than casino operators. Shares of IGT were down 2 percent on an average daily basis while Bally Technologies were off more than 17 percent.

Wachovia Capital Markets gaming analyst Brian McGill, however, said there was good news for slot machine companies in the future. Favorable legislation and gaming referendums, notably in Florida and California, could give the casino industry approximately 158,000 new slot machines over the next three years.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or (702) 477-3871.