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Casino Firms' Shares Fall on Slow Holidays

January 09, 2003|From Bloomberg News

Shares of casino companies tumbled Monday after MGM Mirage and Mandalay Resort Group said that fewer gamblers came to Las Vegas during the holidays and those who did wagered less money, hurting fourth-quarter profit.

MGM Mirage, the second-biggest owner of casinos, dropped $3.73 to $28.89, while Mandalay slid $3.78 to $27.01. Park Place Entertainment Corp., the largest casino company, fell 74 cents to $7.65. All three are based in Las Vegas and trade on the New York Stock Exchange.

The Standard & Poor's index of 10 casino stocks tumbled 6.1%.

The number of people flying to Las Vegas in November was 13% below the 2000 rate, and Mandalay said fewer people than expected visited its properties during the Christmas and New Year's holidays. MGM Mirage said its clients wagered less.

Las Vegas hotels were about 90% occupied for New Year's Eve, less than the usual sellout and a sign consumers may be pulling back on spending.

"The upper echelon of the U.S. consumer who usually goes to Las Vegas was a little tighter on the wallet this time," said Jason Schrotberger, an analyst for Turner Investment Partners. "The market is also taking a toll on the guy who makes $30,000 to $60,000 a year."

MGM Mirage said it earned 24 cents to 27 cents a share in the fourth quarter. Wall Street was expecting the company to earn 43 cents a share, based on the median estimate of analysts polled by Thomson First Call.

Mandalay, owner of the Luxor and Mandalay Bay casinos, said Tuesday night that it will earn about 10 cents a share in the fourth quarter ending Jan. 31, below the 22-cent-a-share average estimate of analysts polled by Thomson First Call. Mandalay said demand in early January is sluggish. Both companies generate about two-thirds of their profit from Las Vegas.

J.P. Morgan Chase & Co. analyst Harry Curtis cut his rating on MGM Mirage, Park Place and Harrah's Entertainment Inc. to "neutral" from "overweight." Harrah's slipped $1.30 to $37.47 on the NYSE.

Weak demand from gamblers may continue into 2003, Curtis wrote in a report.

Demand for hotel rooms is being driven by conventions, which typically decline during the summer. That may force casinos to cut their room rates to attract leisure travelers, some analysts said.

MGM Mirage President and Chief Financial Officer James Murren said most of the company's shortfall came because gamblers in the U.S. wagered less in December than a year ago.

"That's a manifestation of a weak economy," Murren said. "I don't have enormously high expectations for the Super Bowl," later this month, he said.

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