Station Casinos boosts outlook for quarter

By Liz Benston (contact)

Wednesday, Sept. 8, 2004 | 10:32 a.m.

Station Casinos Inc. officials said they expect the company's third-quarter profit to be stronger than expected based on the strength of the Las Vegas economy and revenue growth trends. Performance in 2005 also should be better than anticipated, the company said.

In a filing with the Securities and Exchange Commission today, Station Casinos said it expects to earn from $86 million to $90 million in the third quarter, up from earlier estimates of $81 million to $86 million.

Continued population growth, a robust housing market and hotel expansions bringing new jobs are among the factors fueling the trend, analysts said.

"This is clear evidence of the strength of the Las Vegas locals market and Station's dominant position within it, both of which have shown no signs of slowing down over the past 12-18 months," Goldman, Sachs & Co. analyst Steven Kent said in a research note to investors today.

In a separate report today, Merrill Lynch & Co. analyst David Anders said he is "pleasantly surprised by Station's outstanding same store growth trends, especially owing to concerns that rising gas prices and the specter of increased interest rates would keep local gaming dollars in consumers' pockets."

Station Casinos also said its upcoming Red Rock Station Casino in Summerlin would cost about $550 million -- around $75 million more than initially projected and about $125 million more than the company's most expensive casino to date, Green Valley Ranch Station in Henderson.

That's in part because of higher materials costs and a decision to develop and operate the resort's full-service restaurants instead of leasing them to third parties, the company said. Strong local gambling trends mean the resort will be designed with a larger casino, it said. The resort is still on track to open by early 2006.

On a per share basis, Station Casinos said it would earn from 42 cents to 46 cents compared to initial estimates of 37 cents to 42 cents.

Analysts had expected the company to earn about 42 cents per share but many increased their estimates this morning on the news. Station Casinos shares rose $1.29 per share, or about 3 percent, to $47.89 in early trading today.

The company said 2004 cash flow would be $364 million to $374 million compared with previously estimated cash flow of $360 million to $370 million.

For 2005, the company said cash flow would be $395 million to $410 million compared with earlier projections of $385 million to $400 million. Earnings projections for 2006 remain unchanged.

Station also said it won't reap fees from the Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians in Michigan and the Mechoopda Indian Tribe of Chico Rancheria in Chico, Calif. in 2005 as expected because of regulatory delays. Station bought a stake in a firm that intends to develop a casino for the Michigan tribe and has struck a deal to develop and manage a casino for the Chico tribe. Both tribes first need federal approvals to obtain land for their casinos.

Separately, several Station executives and directors have sold hundreds of thousands of shares over the past several weeks. In the past week, Station President Lorenzo Fertitta sold 154,500 shares and Chief Executive Frank Fertitta III sold 135,000 shares. Chief Financial Officer Glenn Christenson sold 7,600 shares and director Blake Sartini sold 71,500 shares in the past week. The Fertitta brothers still own more than 4 million shares each through a family trust.