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Casinos Crap Out

By Michael Fowlkes
Published: May 03, 2007

Chances are if you have ever walked into a casino, you learned pretty quickly that the house always wins. At least that’s what we tell ourselves as we walk back to our rooms wondering what happened to last month’s paycheck. But today the rules have shifted and it’s the casinos that are getting hit.

The pain started last night with Las Vegas Sands (NYSE: LVS), which traded down about 6% after hours and hasn’t been able to make up much of that fall in today’s market. The company reported that its first quarter net profit dropped 25% from the same period last year. It blames the lower profit numbers on a jump in expenses that resulted from planned openings of a couple new casinos. The company has new casinos opening up in Macau, Singapore and the United States. With about an hour left in Thursday’s session, Las Vegas Sands is currently trading down 4.6% to $84.46.

Casinos continued to take a hit with poor earnings this morning from MGM MIRAGE (NYSE: MGM). For its quarter, MGM was able to see Q1 profit rise by 17%, but the company came up short where it counted and only posted earnings per share of 55 cents per share, which fell below the 63 cents that analysts had been expecting to see out of the casino operator. According to Matthew Jacob, an analyst at Majestic Research, the larger casinos are starting to feel the pinch of rising gasoline prices and interest rates. MGM is currently trading down 4.5% on the day, trading down to $65.21 with one hour left in trading.

Rounding out the list of casino losers today we come to Trump Entertainment Resorts Inc. (NASDAQ: TRMP), which also came up a little short this morning. The company announced its first quarter earnings this morning and, as expected, the casino posted a loss, but unfortunately for “The Donald” this past quarter’s loss was even greater than analysts had been expecting to see. Citing lower revenues from gaming, the company saw a loss in the quarter of 26 cents per share, which was slightly greater than the 25 cent loss that we had been looking to see for the quarter. As a result, shares of Trump were hit hard today and drove the stock down to set a new 52-week low in the session. After trading down as low as $15.56 we have seen a slight rise, but not much, with shares now down 4.4% to $15.72 down $0.73 with a little less than an hour to go.

Definitely a tough day for the casinos today. Having wasted many a dollar in their respective casinos over the year, I find it hard to feel too bad for them though. While times may be down for now, I have to always remind myself of the wisdom I have tried to learn through the years the house will always win.

Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor’s Observer.

Disclosure: Mr. Fowlkes owns and/or controls diversified portfolios of long and short stock and option positions that include holdings in LVS.