Casinos rise on possible Vegas uptick

May 5, 2009 11:48 PM
Staff & Wire Reports |

Shares of casino operators climbed Tuesday as investors largely dismissed lackluster earnings results from MGM MIRAGE and Wynn Resorts Ltd. to focus instead on hints that Las Vegas may be showing signs of improvement.

Late Monday, MGM MIRAGE, which is majority owned by billionaire Kirk Kerkorian, reported a first-quarter profit on a hefty gain from its Treasure Island sale, but adjusted results missed Wall Street's expectations.

Still, Chairman and Chief Executive Jim Murren provided somewhat positive news on the Las Vegas market during a conference call, saying demand was improving and room rates appeared to be "firming."

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But Goldman Sachs' Steven Kent cautioned that MGM's stable occupancy levels were largely due to discounts.

"With demand soft and new capacity coming on and few other levers to pull, MGM profit levels could stay at these depressed levels," he wrote in a client note.

Kent maintained a "Neutral" rating and said the company's price target was under review.

MGM MIRAGE's stock gained $2.63, or 27.8 percent,to $12.07 in afternoon trading. The shares have traded in a 52-week range of $1.81 to $53.67.

Analysts were curious what type of view Wynn Resort, led by billionaire Steve Wynn, would give on Las Vegas. Comments on the Las Vegas market were expected during the company's Tuesday conference call.

"Yesterday, MGM was optimistic that trends in Las Vegas may have bottomed and the high end is holding up fairly well, we will be interested to see if Wynn management reiterates the viewpoint," Robert LaFleur of Susquehanna Financial Group said.

JPMorgan's Joseph Greff also pointed out that Wynn's Las Vegas results were not as bad as some had feared, with net revenue of $291.3 million topping his $288.6 million forecast.

Both LaFleur and Greff reiterated their "Neutral" ratings on Wynn Resorts.

Wynn's stock jumped $7, or 16.4 percent, to $49.81. The shares have traded in a range of $14.50 to $119.74 over the past year.

Elsewhere in the sector, Las Vegas Sands Corp.  gained $1.95, or 20.5 percent, to $11.45. The Sheldon Adelson-led company will report its first-quarter earnings results later Tuesday.

Among the regional casino operators, Penn National Gaming Inc. climbed 91 cents to $34.95 and Pinnacle Entertainment Inc. rose 49 cents, or 3.7 percent, to $13.80.

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