Casinos Earnings Down, But Better than Analysts' Expectations

Several publicly traded casino companies have posted their second-quarter earnings over the last couple of weeks. While results were mixed, Wall Street loved the news, sending almost every gaming stock higher on the results. Wall Street had apparently been expecting the worst and received better.

The most uplifting news came from Wynn Resorts. While Wynn saw some erosion of its Las Vegas revenue, its property in Macau more than made up the difference. And unlike most of the other companies in the casino sector, Wynn actually grew their bottom line year-over-year, posting earnings of $271 million versus the $89 million from last year's second quarter.

MGM Mirage did fairly well considering their Vegas-centric positioning in the sector and the continuing burden of CityCenter's development. MGM suffered only a 2% drop in overall revenue. The largest itemized revenue decline came from table games, which were 8% lower than the same period last year. Hotel room occupancy rates were off slightly for the second quarter, but still came in at a healthy 97%. Overall, MGM earned $113 million for the second quarter. While this was down from the $360 million they made in last year's second quarter, that figure also includes $177 million from the 2007 earnings and sale of Primm Valley Resorts and properties in Laughlin.

Boyd Gaming also seemed to weather the economic downturn with minimal pain. While revenues from its Vegas and Atlantic City properties were down, Boyd still managed to earn $21.6 million for the quarter, down just slightly from the $22.1 million they made in the same period last year. Boyd got an extra boost from Wall Street, when they simultaneously announced that they would be suspending construction of Echelon for the next nine to twelve months.

While most companies managed to post positive earnings, Las Vegas Sands was among the few, like Harrah's that ended the second quarter in the red. The Sands grew revenue in the second quarter by more than 40% year-over-year, but the growth was primarily driven by the newly opened Venetian Macau. Despite the increased revenues, the Sands ultimately lost $8 million in the second quarter. While this was marginally better than the $11 million they lost in the first quarter, it was still short of the $34 million they made in the second quarter of 2007. The problem for Sands seems to have less to do with the flagging U.S. economy and more to do with overcoming the costs associated with their rapid expansion. Higher depreciation, amortization, and interest expense appeared to be the Sands' bottom-line culprits.

All in all, casino companies appeared to hold their own in one of the toughest quarters the industry has seen since the quarter immediately following September 11, 2001. And after the second-quarter earnings announcements, Wall Street is betting that the big players will emerge from the current economic malaise in relatively good shape.