Gaming stocks tumble on earnings, economic news

By Steve Green

Published Tuesday, Oct. 27, 2009 | 2:34 p.m.

Updated Tuesday, Oct. 27, 2009 | 3:52 p.m.

Gaming stocks fell broadly Tuesday after three big Las Vegas hotel-casino operators reported third-quarter results reflecting the continuing economic downturn.

And with consumer confidence nationwide falling in October, more pain may be in store for Las Vegas. U.S. consumer confidence is seen as a key factor influencing decisions to travel to Las Vegas and other destinations.

Harrah's Entertainment Inc., which doesn't have publicly held stock, said Tuesday that its revenue fell 13.7 percent to $2.282 billion and even more in Las Vegas, by 17.5 percent, as the stubborn recession continued to curtail activity at its casinos and hotels.

Wynn Resorts Ltd. said revenue grew slightly to $773 million, but its quarterly profit was off by a third to $34.2 million or 28 cents per share. Wynn reported hotel room occupancy of 83.9 percent during the quarter was down from 96.1 percent during the same period of 2008. Average daily room rates fell from $272 to $210.

Boyd Gaming Corp. said its revenue fell 28.3 percent to $398.2 million and its quarterly profit of $6.3 million or 7 cents per share missed analyst expectations -- reported by Thomson Reuters -- of 10 cents.

Even as it beat earnings expectations of 16 cents per share, Wynn stock fell 11 percent to $56.13.

Boyd was off 17.8 percent to $8.78.

MGM Mirage and Las Vegas Sands Corp., like Wynn and Harrah's big operators on the Las Vegas Strip, have yet to report third quarter results. But their stock fell too, with MGM Mirage declining 12.45 percent to $9.63 and Las Vegas Sands off 10.9 percent to $14.31.

Also Tuesday, the Conference Board said its U.S. consumer confidence index unexpectedly fell to 47.7 in October. It also fell in September to 53.4 vs. its base year reading of 100 in 1985.

The New York-based board's Consumer Confidence Survey is based on a sample of 5,000 U.S. households.

"Consumers' assessment of present-day conditions has grown less favorable, with labor market conditions playing a major role in this grimmer assessment,'' said Lynn Franco, director of the Conference Board Consumer Research Center. "The short-term outlook has also grown more negative, as a greater proportion of consumers anticipate business and labor market conditions will worsen in the months ahead. Consumers also remain quite pessimistic about their future earnings, a sentiment that will likely constrain spending during the holidays."

Commenting on the importance of this and similar national economic reports, Las Vegas economic forecaster John Restrepo of Restrepo Consulting Group wrote in his latest Economic INsight report: "The health of the national economy IS the primary driver of the health of the Southern Nevada economy. As essentially export-based -- we export experience and entertainment -- our economy is very tied to the health of consumer confidence and discretionary spending, not only in the U.S., but globally as well."

In an interview, Restrepo agreed with the Conference Board that Tuesday's numbers show consumers worried about jobs and housing prices will remain reluctant to spend money.

"An area such as ours based on discretionary spending is going to continue struggling," he said. "If we had a more diverse economy, this wouldn't be such a big issue."

Restrepo said he recently toured MGM Mirage's CityCenter megaresort complex opening in December.

"It's a fabulous project. We're all hoping it will be a catalyst to a return to spending we don't have now," he said.

It's unknown if the boost to Las Vegas visitation CityCenter is predicted to bring will be sustainable and whether it will cannibalize existing business, Restrepo said.

"We're in such uncharted territory with this kind of recession," he said.