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.
PROFITS SURGE FOR WMS INDUSTRIES Chicago-based slot machine maker WMS Industries continued its financial comeback Tuesday, saying its earnings jumped 67 percent in the fourth quarter 47 percent for the fiscal year. The company said it had a 35 percent year-over-year boost in new slot machine shipments, which fueled an increase in both revenues and cash flow. "With investments in next-generation technologies, a global organization of development studios and financial resources further strengthened by the record fiscal 2007 results, we established a solid base from which we expect to deliver consistent operating execution in fiscal 2008 and beyond," WMS President and CEO Brian Gamache said in a statement. The gaming equipment provider has re-emerged in the past few years as its earnings sagged. WMS reported net income of $16.7 million, or 29 cents a share, in the quarter ended June 30, up from $10 million, or 18 cents a share, a year earlier. Analysts polled by Thomson Financial predicted fourth-quarter earnings of 28 cents a share. For the year, WMS said its net income was $48.9 million or 86 cents per share. Company revenues were $158 million in the quarter, a 28.8 percent increase compared with $122.7 million in the same quarter a year ago. Twelve-month revenues were $539.8 million, a 19.6 percent increase from $451.2 million in 2006. WMS said it sold 7,555 slot machines in the quarter and 25,613 in all of fiscal 2007. The company announced earnings after trading on the New York Stock Exchange ended. Shares in WMS finished down 92 cents or 3.37 percent to close at $26.37. Some analysts thought the price, which was as high as $31 a share in June, could entice investors. "Shares of WMS, like most of the gaming sector, have seen significant declines in July," Morgan Joseph gaming analyst Adam Steinberg said in a note to investors before earnings were announced. "We believe that a strong quarter, combined with higher guidance, could boost WMS. We view the recent lows as an opportunity for investors to establish a position in one of the leading gaming technology companies." HOWARD STUTZREVIEW-JOURNAL
