October 27, 2009 / 5:46 PM / 9 years ago

Casino profits disappoint and outlook stirs fears

* Global spending fears weigh on sector

* Macau and Vegas hard hit

* Slotmakers also losers

* Wynn shares fall 9.5 percent; Boyd falls 13 percent

By Deena Beasley

LOS ANGELES, Oct 27 (Reuters) - Weakness in two of the world’s largest gambling destinations — Macau and Las Vegas — and fears that casino visitors’ discretionary spending will not bounce back for the rest of this year, left shares across the entire sector broadly lower on Tuesday.

Quarterly earnings at Las Vegas-based casino operators Wynn Resorts Ltd (WYNN.O) and Boyd Gaming Corp (BYD.N) disappointed investors, battering shares at both companies and sending tremors throughout the sector.

In addition, privately held Harrah’s Entertainment, the world’s largest casino operator and owner of Las Vegas resorts such as Caesars Palace, said its third-quarter revenue fell 13.7 percent and property earnings dropped 12.2 percent.

Wynn posted better-than-expected quarterly earnings on Tuesday, but results for its Macau resort fell short of Wall Street expectations and its shares dropped 7 percent.

The bleak news hit more than just the big casino operators. Shares of casino slot machines and other games, like video poker, also fell. International Game Technology (IGT.N), which makes slot machines, lost 7.4 percent to $19.02, and Bally Technologies Inc BYI.N fell more than 5 percent to $40.83.

“Macau EBITDA only exceeded expectations by 2 percent,” Stifel Nicolaus analyst Steven Wieczynski said in a research note. “Shares are reacting negatively as we believe investors expected more upside out of Macau.”

Wynn, run by casino mogul Steve Wynn, operates two casino-resorts in Las Vegas and one in Macau, the only place in China where gambling is legal. The company’s second Macau resort, Encore Macau, is scheduled to open April 1.

Goldman Sachs analyst Steven Kent said upside for Wynn’s shares could remain limited in the near term until investors gain clarity on the trend of Macau visa restrictions. Chinese officials have eased restrictions put in place last year, but there have been recent reports of a tightening of visa requirements for frequent visitors from mainland China. Wynn, which earlier this month raised about $1.8 billion via a Hong Kong listing of shares in its Wynn Macau Ltd (1128.HK) unit, posted an adjusted profit of 33 cents per share, which beat the average analyst estimate of 15 cents a share, according to Thomson Reuters I/B/E/S.

Boyd posted an adjusted profit of 9 cents a share, just short of the 10 cents expected by Wall Street, but its Las Vegas results were a disappointment.

“The Las Vegas locals market is really bad and downtown is not much better,” said Susquehanna Financial analyst Robert LaFleur. He noted that Boyd’s Borgata joint venture with MGM Mirage (MGM.N) in Atlantic City, New Jersey, did better, mainly because “it’s the best house in a really bad neighborhood.”

Boyd, which owns and operates 16 casinos in six states, last year suspended work on its partially built Echelon project on the Las Vegas Strip. Its existing Las Vegas properties cater mainly to local residents, rather than tourists. Harrah’s, which in 2008 was acquired jointly by Apollo Global Management and TPG Capital LP [TPG.UL], said its third-quarter property EBITDA fell to $563.7 million from $641.7 million.

“The company’s 2009 third-quarter results declined due primarily to the impact of the recession on customers’ discretionary spending,” Harrah’s said in a statement.

Boyd’s shares were down $1.41 at $9.27 on Nasdaq, while Wynn’s shares were down $5.87 at $57.20 in morning trading on Nasdaq.

Shares of MGM Mirage were down $1.23 cents, or 11 percent, at $9.76 on the New York Stock Exchange. Shares of Las Vegas Sands (LVS.N), which also operates in Macau and Las Vegas, fell $1.40, or 8.7 percent, to $14.66.

(Reporting by Deena Beasley, editing by Dave Zimmerman and Gunna Dickson)

((deena.beasley@thomsonreuters.com; 1 213 955-6746)) Keywords: CASINOS/

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