MGM shares tumble on pre-announcement

Feb 13, 2008 2:24 AM

Earnings by Ray Poirier | Looking to put a spin on its fourth quarter earnings, MGM MIRAGE Inc. (MGM) offered some insight into the report on Friday suggesting earnings per share of between $0.60 and $0.65 per share.

But, when analysts extracted the infusion of $1 billion from a Dubai investment, they reduced the estimate to between $0.41 and $0.46 per share, substantially below the $0.55 per share estimated by a majority of analysts.

Investors reacted early on Friday morning, sending the shares down to the $67 area with only slight improvement through the trading day. At the close, MGM was selling at $67.93, down $3.88 for the day.

Gaming analyst Robin Farley of UBS Investment Research downgraded the shares to "Neutral" from "Buy" and reduced her target from $100 per share to $80 per share. She cited the company’s fourth quarter adjusted earnings outlook and weak Las Vegas Strip results.

But Larry Klatzkin of Jefferies & Co. kept his "Buy" rating on the shares saying that although he was disappointed with the lack of gain on the Strip, "the Strip being flat does not leave us tremendously concerned."

Further views relative to Strip activity are expected on Tuesday, Feb. 12, when Wynn Resorts Ltd. (WYNN) releases its fourth quarter report.

WMS Industries

Not only did WMS Industries Inc. (WMS) score record revenues during its second fiscal quarter but also saw increased activity during the next two quarters.

Revenues grew 18% to $159 million with net income coming in at $16 million or $0.27 per share, or two cents better than analysts had predicted.

Worldwide unit shipments rose to a second-quarter record of 7,064 gaming machines while the participation installed base increased 6% or 492 units.

Reviewing the second quarter, Brian Gamache, president and CEO, noted that the results "were driven by the exceptional 34% growth in gaming operations revenue and the 47% increase in international unit sales revenues.

"We continue to expect strong second half fiscal 2008 financial results, which is consistent with our experience in fiscal 2007 and are raising our total revenues guidance for fiscal 2008 to a range of $620 million to $632 million from our previous range of $600 million to $615 million, based on our performance in the first half of fiscal 2008."

Gamache also said he expected the company to benefit from the recently approved expansion of slots activity at four major Indian casinos in California.

Penn National

Potential buyers Fortress Investment Group LLC and Centerbridge Partners LP must have been frowning upon receiving the fourth quarter profit picture from Penn National Gaming Inc. (PENN).

The company reported a 63% decline in net profit, primarily because of the absence of Hurricane Katrina-related insurance settlement gains reported in the comparable period of 2006.

Actually, despite mid-winter snows that affected business at several of the company’s gaming properties, Penn National Gaming reported earnings of $32.2 million or $0.36 per share. Last year, excluding one time charges, the company earned $0.37 per share. When the additional revenues were factored in the company’s earnings per share mushroomed to $0.94 per share.

Analysts had forecast the company’s fourth quarter per share earnings would be $0.41.

Quarterly revenue grew two percent to $585 million from last year’s $572 million but trailed the company’s estimate of $595 million.

Following the company’s earnings announcement, it revealed that Tim Wilmott, a longtime executive with Harrah’s Entertainment Inc., had been appointed chief operating officer.

For the past four years, Wilmott oversaw the operation of Harrah’s 48 casinos, 38,000 hotel rooms and 300 restaurants. He previously had supervised Harrah’s eastern division, thus giving him exposure to the Atlantic City gaming market.

Recently, Penn National Gaming, still working toward the $6.1 billion buyout by the private equity partners, made an offer to Atlantic City officials for Bader Field which is expected to be developed into a multiple casino property.