Station Casinos stock downgraded

Thursday, July 26, 2001 | 11:05 a.m.

Station Casinos Inc. was downgraded by three Wall Street brokerage firms this morning, one day after the company reported disappointing earnings for the second quarter.

The stock was downgraded from "buy" to "attractive" by Bear Stearns, and from "buy" to "hold" by CIBC World Markets. But the most severe downgrade came from Gerard Klauer Mattison, which lowered the stock from "neutral" to "underperform" -- a rating equivalent to "sell."

Gerard Klauer Mattison gaming analyst Jeffrey Logsdon set a 12-month price target of $12, $2 below its current value, "given the eroding fundamentals due to the economy and competition and delays in projectable returns from properties acquired or the new property (Green Valley Ranch)."

"We do not believe (Station) can continue to command a premium multiple given its lackluster financial and fundamental performance," Logsdon wrote. "We do not expect investor interest to pick up until later in 2001, when the visibility of integration and expansion efforts is clearer."

Bear Stearns analyst Jason Ader called the quarter "clearly disappointing." He set a price target of $18 to $19 per share.

"While we expected 2001 to be a transition year for the company, Station has clearly experienced more of a hiccup than originally envisioned in integrating its newly acquired properties into the franchise," Ader wrote. The stock could command a higher premium in the future, Ader said, if there's evidence "that competitive conditions are stabilizing, new supply (in the Las Vegas locals market) is being absorbed and the demand curve is tilting in the company's favor."

CIBC gaming analyst William Schmitt took a similarly cautious tone in his downgrade note.

"We do not recommend investment in shares of Station Casinos until such time as operations begin to generate same-store (cash flow) improvements," Schmitt said.

Station traded at $13.80 this morning, down 70 cents. The stock closed Wednesday at $14.50, off 44 cents on the earnings news.