Pinnacle posts lower profits, but company observers shrug

Pinnacle Entertainment’s second-quarter earnings didn’t match up with the company’s numbers from a year ago, but executives and analysts weren’t too concerned Tuesday.

Wall Street was more impressed as the Las Vegas-based casino operator reported increased financial results at its flagship casinos in Louisiana and Indiana.

Pinnacle said its net income for the quarter ended June 30 was $9.9 million, or 16 cents a share, down from $46 million, or 93 cents a share, a year earlier. Analysts surveyed by Thomson Financial expected the company to earn 18 cents a share.

In a statement, Pinnacle said the quarter was affected by increased preopening costs associated with the company’s under-construction casinos in St. Louis, and a financial loss due to the early retirement of debt. A year ago, Pinnacle’s second quarter benefited from a nearly $45 million net gain after its proposed buyout of Aztar Corp. was terminated and an $11 million gain on the sale of a California card room.

Revenue rose 1.8 percent to $232.9 million from $228.8 million.

CIBC World Markets gaming analyst David Katz thought investors would look past the company’s raw numbers and see the success Pinnacle had operating casinos in regional jurisdictions.

"The results were stronger than expected at the property level, with adjusted earnings per share above our estimate," Katz said in a note to investors. "At the property level, several of the key markets, Lake Charles, (La.), and Indiana, were ahead of our forecast. We view this as a positive for the shares, given the mixed results reported by other riverboat operators thus far this quarter."

At L’Auberge du Lac in Lake Charles, the casino reported revenues of $81.8 million in the quarter, a 5.5 percent increase from a year ago. Pinnacle’s Belterra casino in Indiana had $44.5 million in revenues, 3.5 percent higher than the 2006 second quarter.

Boomtown New Orleans had revenues of $41 million, well behind revenues of $52 million a year ago that were reflective of a large increase in business coming from customers displaced by the 2005 Gulf Coast hurricanes. More than a dozen casinos in neighboring Mississippi and parts of New Orleans were closed because of the storms. Boomtown was still well ahead of the casino’s pre-hurricane quarterly revenues of $28.6 million.

"Overall, Pinnacle property results exceeded expectations, and we were particularly impressed with L’Auberge," Deutsche Bank gaming analyst Elizabeth McNellis said in a note to investors.

Pinnacle updated investors on the company’s development projects; it’s first St. Louis casino, the $495 million Lumiere Place near the Gateway Arch in downtown, is expected to open by December while the opening of a casino in St. Louis County has been pushed back to the first half of 2009.

Pinnacle Chairman Dan Lee said his company’s plans in Atlantic City, at the site of the now closed Sands casino, are progressing. The company plans to implode the closed hotel-casino in the fall and open a new resort by 2011 or 2012.

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