Gaming analyst sounds earnings warning

Friday, Dec. 22, 2000 | 10:50 a.m.

Wall Street concern over the future outlook for gaming continued Thursday, when a top gaming analyst issued a report expressing concern that two major Las Vegas gaming companies could miss their fourth-quarter earnings estimates.

Saying he's become "increasingly concerned about the outlook for fourth-quarter earnings," Bear Stearns gaming analyst Jason Ader said he believes Harrah's Entertainment Inc. and Park Place Entertainment Corp. could potentially miss their estimates.

Harrah's earnings could be hurt by losses from National Airlines, which has declared bankruptcy, as well as "continued disappointing results in New Orleans" and poor weather conditions throughout the Midwest, Ader wrote. Park Place is at risk because of continued heavy competition in Mississippi, "mixed operating results in Las Vegas," and the yet-to-be-closed sale of the Las Vegas Hilton, Ader wrote.

However, Ader noted that a strong New Year's weekend could make or break Park Place's fourth quarter, as the company relies heavily on the high-end market.

Ader did not revise earnings estimates for either company.

However, Ader said that he believes MGM MIRAGE should be able to meet estimates. "We continue to believe that MGM MIRAGE has premium assets in the Las Vegas market and as such, continues to command market leading room rates and operating leverage," he said. The major gaming equipment manufacturers, including International Game Technology, WMS Industries, Anchor Gaming and Alliance Gaming, should also meet estimates, Ader said.

However, Ader sounded a note of caution for the entire industry going into 2001.

"We believe current 2001 estimates could prove to be rich at this point, particularly as comparisons become increasingly difficult and competition intensifies in select markets," Ader said. "In our view, the majority of 2001 estimates do not reflect the potential gaming landscape in 2001."