Analysts adjust ratings on casino operators

Thursday, Jan. 10, 2002 | 9:45 a.m.

Two analysts raised their fourth-quarter earnings estimates for Harrah's Entertainment Inc., following strong December win numbers from Atlantic City and several Midwestern gaming markets.

Merrill Lynch's David Anders raised his fourth-quarter estimate to 40 cents per share, up from 37 cents per share. Jason Ader of Bear Stearns raised his estimate to 39 cents per share from 35 cents per share, and hiked his fourth-quarter cash flow estimate to $218 million, up $6 million.

Both analysts cited strong gaming win results from Atlantic City and the Midwest. Atlantic City posted gaming win growth of 18 percent in December, while Missouri, Illinois and Iowa all reported growth exceeding 20 percent. Harrah's operates casinos in all four areas.

The strong Midwestern results prompted Anders to hike estimates on other operators as well. Merrill Lynch raised its fourth quarter estimate on Argosy Gaming Co. from 56 cents to 60 cents per share, and on Ameristar Casinos from 35 cents to 38 cents per share.

Also this morning, Robertson Stephens gaming analyst Harry Curtis raised MGM MIRAGE from "buy" to "strong buy." Curtis believes MGM MIRAGE's cash flow will hit $1.2 billion to $1.25 billion in 2003, suggesting its shares should trade at $37-$39 within 12 months.

"We believe room rates at MGM's Las Vegas properties are returning to full pricing, i.e., rates that are in line with last year," Curtis wrote. "If MGM is successful in re-establishing higher rates, other major operators on the Strip are likely to follow, in our opinion."

Separately, Prudential Securities reinitiated coverage of the gaming industry Wednesday, with initial coverage of eight gaming companies.

Analyst Bill Lerner placed "buy" ratings on Harrah's, Park Place Entertainment Corp., International Game Technology and WMS Gaming. Lerner put hold ratings on MGM MIRAGE, Mandalay Resort Group, Station Casinos Inc. and Argosy.