The “Big Six” game operators are starting 2006 with record profits, up nearly 45% from the first quarter of 2005, driven by surging demand to travel to Las Vegas, strong table play at casinos and two of the biggest mergers in industry history, analysts said this week.
With major casino companies set to report first-quarter earnings next week, analysts predict the combined net profit of the six Nevada-based gaming companies may have jumped 44.8 percent to $572 million from $395 million in the first quarter of 2005.
Deutsche Bank analyst Mark Falcone said earnings forecasts for the first quarter and the rest of the year were conservative as economic fundamentals were proving stronger than expected.
“The growth was significant (in the first quarter) as the local market benefited from a mild winter and Las Vegas was buoyed by higher-end play growth,” he said.
Big Six 게임 회사는 Boyd Gaming Corp., Harah’s Entertainment, Las Vegas Sands Corp., MGM Mirage, Station Casino 및 Wynn Resorts Ltd.입니다.
Penn National, a major Las Vegas-based gaming company, also enjoyed significant growth in its first-quarter net profit of $46.7 million, up 77.4% from $26.3 million a year earlier, analysts said.
The Las Vegas-based Big 6 is expected to report total revenue of $5.9 billion in the first quarter, up 55.7% from $3.8 billion a year earlier.
Cash flow, including interest, depreciation expenses, taxes and earnings before amortization, should have increased to $1.9 billion, an increase of 58.3% compared to $1.2 billion in the first quarter of 2005.
Brian Gordon, a partner at Las Vegas-based financial consultant Applied Analysis, said each operator has benefited from a significant increase in visitor numbers, changes in convention businesses outside the Gulf Coast, and increased spending by individual visitors over the past three months.
“Overall, we’re seeing teen growth overall. We’re expecting to see that level of growth in the gaming sector in the first quarter as well,” he said. “Growth shows a healthy foundation for the economy, but we don’t expect to see more than 20% growth anymore. That kind of growth can’t sustain itself. At the same time, we haven’t seen a real decline in gaming operators yet.”
He said increasing spending at high levels in the gaming market was particularly important to sustain growth, citing heavy baccarat amounts and robust room rates.
Brian McGill, an analyst at Susquehanna Financial Group, said casino operators have been doing a good job of securing players to spend more even if the increase in visitor numbers eases.
Last week, sovereign ratings agency Standard & Poor’s forecast continued growth through 2006, helped by strong consumer spending, despite downward pressure from rising interest rates and energy costs.
But given the likely slowdown in the U.S. economy, the game’s revenue growth will be modest, it said.
As a result, S&P expects gaming companies to average mid-single-digit game revenue growth for the rest of the year. 파워볼실시간
Falcon said macroeconomic trends in the country, including high oil prices, gasoline prices and interest rate hikes, could hurt the gaming industry.
“Historically, there has been no correlation between national (economic) trends and games, but we need to recognize that it could affect the growth of game sales in Las Vegas,” he said, predicting high single-digit growth from May.
McGill gave a more optimistic outlook, forecasting double-digit growth for the rest of 2006 despite a slowdown expected to begin in a slower summer season.
Goldman Sachs analyst Steve Kent was particularly bullish on Las Vegas operators, building on the growth plans of manufacturers, especially Las Vegas Sands and Station casinos, revenue-driven management teams and unique positioning in their respective markets.
He highlighted strong gaming trends in Las Vegas, Atlantic City and Macau, as well as expansion plans that are ongoing or expected to be announced at the end of the year.
Kent said the market for replacement machines and new slot additions continues to be relatively soft, so slot makers should report a fairly good quarter.
