Solid quarters for Station Casinos, Aztar

Oct 25, 2005 5:40 AM

Third quarter earnings reported by Station Casinos Inc. (STN) easily topped both the previous years’ earnings and those projected by gaming analysts, but the report wasn’t enough to boost the company’s share price.

In fact, just a few hours after the report, the shares had fallen to the mid-$63 level before finding a little relief the following day. By Friday afternoon, the share price was still below the $66.49 level it had reached on Monday.

Net income for the period that ended on Sept. 30 rose to $39 million or $0.56 per share compared to the $29.1 million or $0.43 per share recorded in the comparable quarter of 2004. Net revenue, excluding promotional allowances, rose 14% to $276.3 million from $242.9 million.

Analysts had expected the company to post a profit of $0.56 per share on revenue of $266.8 million.

Although company executives described the quarter in "blockbuster" terms, they failed to change the previously stated guidance for the fourth quarter. They said they expect earnings per share to be between $0.59 and $0.64 on revenue growth of between 6% and 8%.

Remarking on the third quarter, Lorenzo Fertitta, vice chairman and president, noted that this was the company’s seventh consecutive quarter of double-digit same-store revenue growth and that it was "driven by the continued strength of the Las Vegas economy."

He added that Station Casinos has not seen "changes in consumer behavior in the Las Vegas local’s market," and that "all of the key metrics that influence our business were very robust during the third quarter, including population growth, new job creation and extensive commercial and residential construction."

Aztar Corp.

Although Aztar Corporation (AZR) also reported a "blowout" quarter for the period that ended on Sept. 29, investors responded with little enthusiasm, essentially keeping the company’s share price in the same trading range of the low $30’s.

What analysts really wanted to know was what the company planned to do with its aging and less productive Tropicana Hotel/Casino on the corner of Las Vegas Boulevard and Tropicana Avenue where it looks out at such high-volume properties as the MGM Grand, Excalibur, Luxor and Mandalay Bay.

But they learned nothing other than management was still developing plans for the highly valuable real estate site.

For the quarter, revenues company-wide were $184.2 million compared to $159.7 million in 2004.

Key to the quarterly earnings gain was a major expansion project at the Tropicana Atlantic City property that saw third quarter revenue move up by 29%.

Robert Haddock, chairman and CEO, explained that "The drivers at the expanded Atlantic City Tropicana during the third quarter were all in full gear and the property led the market in revenue growth in all casino products. Table games win was up 40% and slot revenue grew 21%. Even with a 30% increase in room capacity, the hotel ran 97% occupancy at an average daily rate that was 17% higher than a year earlier."