Park Place business picks up

Tuesday, June 24, 2003 | 10:48 a.m.

SUN STAFF AND WIRE REPORTS

Park Place Entertainment Corp. of Las Vegas, the world's biggest casino company, today said second-quarter earnings will fall less than the company's earlier forecast because business picked up faster than it expected in May and the first half of June.

Net income in the quarter ending June 30 will be 11 cents to 15 cents, stronger than last month's estimate of 7 cents to 11 cents, the company said in a statement. Net income was $96 million, or 31 cents, in the year-earlier period.

"The guidance announced on May 1 was based on weak April results and concerns about the economy and the potential negative impact on tourism of world events -- including the SARS outbreak and the ongoing presence of United States military forces in Iraq," Park Place said today.

"Relative to expectations that reflected those concerns, the company experienced strong results in May. Results for the first half of June, while not as strong as May, are stronger than those implied in the company's previous guidance," the company said.

Analysts said they expected some improvement from weak April figures.

"We believe better demand trends in May/June made up for a terrible April," J.P. Morgan casino analyst Harry Curtis said in a research note today.

The company's flagship, Caesars Palace, is benefiting from the Celine Dion show, which is driving traffic through the property, Curtis wrote.

"Caesars appears to be successfully shifting its investment strategy to appeal to a wider range of customers in Las Vegas versus focusing on bolstering market share from high-end customers, which defined the investment decisions during the 1999-2001 timeframe," he said.

Given that competitor Mandalay Resort Group said room revenue -- though boosted by the company's new convention center at Mandalay Bay -- were up between 5 and 10 percent in May, "this probably should have been expected," Lehman Brothers analyst Joyce Minor wrote in a research note.

Park Place's "revenue per available room" on the Strip was down at least 8 percent in April, analysts said.

So far this month, major Strip operators, including Park Place, have seen their stock prices appreciate an average of 10 percent compared to just 2 percent for the Standard & Poor's 500 Index, Minor wrote to investors.

"It's hard to tell whether these results indicate a recovery or just pent up demand," she said.

Park Place owns and manages 27 casinos and resorts under the Caesars, Flamingo, Bally's, Paris, Hilton and Grand Casinos names in Las Vegas, Atlantic City, Mississippi and other markets.

Casino revenue in Atlantic City, where Park Place generates a third of its profit, rose 7.8 percent in May from a year earlier, the state said. Nevada numbers for May have not yet been announced. The state Gaming Control Board earlier this month said Nevada gamblers lost $744.6 million to casinos in April, down 6.9 percent from April 2002.

Analysts had expected profit by Park Place of 10 cents a share, according to a Thomson Financial survey. Park Place plans to issue final results July 24.

Shares of Park Place rose 33 cents to $8.55 at 10:30 a.m. in New York Stock Exchange composite trading this morning. The stock had declined 20 percent in the past year.