The sale of stock in a rival casino operator helped Las Vegas-based Pinnacle Entertainment reverse a second quarter loss from a year ago.
The regional casino operator reported a profit of $4.7 million, or 8 cents per share, for the quarter that ended June 30. A year ago, the company lost $18.1 million, or 30 cents a share. Analysts forecast net income of 5 cents per share, according to Thomson Reuters.
Pinnacle, which operates the Boomtown Casino near Reno but primarily operates hotel-casinos in Louisiana, Indiana, and Missouri, said Friday it sold 1.2 million shares in Las Vegas-based Ameristar Casinos for a net gain of $12.9 million.
In a previous quarterly earnings report, Pinnacle said it bought the stock in hopes of pursuing a merger with Ameristar. The failing credit markets and the challenged economy, however, ended that idea.
Pinnacle also said it amended its bank credit agreement during the quarter.
The company’s revenue during the quarter was about flat at $266.3 million, driven primarily by improvements at the company’s Lumiere Place hotel-casino in downtown St. Louis.
“Our properties performed solidly in the second quarter, achieving improved overall results despite the generally weak economy,” Pinnacle Chairman and Chief Executive Officer Dan Lee said in a statement.
Deutsche Bank gaming analyst Andrew Zarnett said the bank credit amendment allows Pinnacle to complete construction of a second casino in the St. Louis area and possibly restart other casino projects, including a second resort in Lake Charles, La., and a proposed casino in Baton Rouge, La.
“We view this amendment as a significant positive, as increased leverage ratio provides the company with ample runway to ramp up River City (St. Louis) and the ability to incur additional debt will allow Pinnacle to resume their development projects which were temporarily suspended,” Zarnett said.
Investors seemed happy by Pinnacle’s quarterly earnings. Shares of the company were almost 13 percent in initial trading on the New York Stock Exchange Friday.
“The profitability performance remained solid, which suggests margin momentum from the first quarter of 2009 continued,” Oppenheimer gaming analyst David Katz wrote in note to investors. “Most important, the amendment to the bank deal provides some flexibility.”