Construction, Competition Cut Ameristar's Outlook

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Riverboat casino operator Ameristar Casinos (Nasdaq: ASCA) saw its stock fall 6.8% to $20.39 in after-hours trading yesterday after the company lowered its third-quarter and full-year guidance. The updated guidance is as follows:

Q3 Guidance

Q3 Guidance	New	Old
Operating Income	$39.0-$40.0M	$42.0-$44.0M
EBITDA	$60.5-$61.5M	$64.0-$66.0M
Diluted EPS	$0.26-$0.28	$0.30-$0.32

Full-Year Guidance

Full-Year Guidance	New	Old
Operating Income	$162.0-$164.0M	$171.0-$179.0M
EBITDA	$247.0-$249.0M	$254.0-$262.0M
Diluted EPS	$1.08-$1.11	$1.17-$1.26

Ameristar attributed the reduced expectations to "greater than anticipated construction disruption" related to the expansion project at the Mountain High property in Black Hawk, Colo., where the company is expanding and upgrading the gaming floor with cashless slots from companies such as International Game Technology (NYSE: IGT) and WMS Industries (NYSE: WMS). Plans include the addition of a 300-room hotel, more covered parking, and upgrading and adding dining options. The company also cited the temporary closure of a main highway connecting Black Hawk and Denver as a contributing factor.

But there were a couple of other noteworthy items. The first was the absence of any blame on Hurricane Katrina, which forced the closure of the Ameristar property in the Vicksburg, Miss. market for three days at the end of August. The fact that management didn't pick on the easy target probably merits some level of respect.

On the other hand, the company also noted that the fiercely competitive environment in the St. Louis market continues to negatively affect profitability as a result of increased promotional spending. Ameristar and rival Harrah's Entertainment (NYSE: HET) have been splitting time in the leading market position since the latter completed a comprehensive expansion project in the summer of 2004. Ameristar did manage to claim the No. 1 market position for the month of August, after Harrah's held the lead for July.

St. Louis Market

Casino	AGRs *
Harrah's Maryland Heights (HET)	$300.8M
Ameristar St. Charles (ASCA)	$297.9M
Casino Queen	$165.4M
Alton Belle (NYSE: AGY)	$110.4M
President	$71.4M

*Adjusted Gross Receipts, twelve trailing months through June 2005.

Ameristar's stock is down off its highs around $30 just a couple of months ago. But at $20.39 a share, or with the company carrying an enterprise value around 7.2 times the new 2005 EBITDA estimate, the stock is still merely reasonably priced. However, I would wait for the stock to fall into the $15-$17 per-share range (EV/EBITDA multiple around 6) before I became a buyer again.

For more Ameristar Foolishness, roll your dice here:

• Ameristar Earns Respect
• Ameristar Is a Hold
• Sizing Up Ameristar (Part I)
• Ameristar: Time to Buy? (Part II)

Fool contributor Jeff Hwang owns shares of Ameristar Casinos and International Game Technology. The Motley Fool has an ironclad disclosure policy.