Over the past two weeks, quarterly results from gaming heavyweights Harrah's Entertainment (NYSE:HET) and MGM Mirage (NYSE:MGM) have suggested that there is plenty of sinning going on in Sin City -- and I mean that as a compliment. In fact, both reported that their Las Vegas operations generated 20% more profits than during this same quarter last year.

Today, we take a closer look at the latest numbers from Pinnacle Entertainment (NYSE:PNK), which announced some fairly robust results of its own in another well-known adult playground -- New Orleans.

Give me a "P"
While it is technically based in Las Vegas, Pinnacle doesn't actually have a casino anywhere near the Strip. However, it does own three resorts in my backyard of Louisiana, with two more currently on the drawing board. Considering that Pinnacle is arguably the state's top gaming operator, I consider it something of a "hometown" team -- cheering along with every high-scoring quarter.

Monday's third-quarter results definitely lit up the scoreboard. Earnings for the period quadrupled from $5 million to $22.4 million ($0.45 per share), on revenues that climbed 36% to $237 million. Admittedly, disruptions caused by last year's hurricanes made for easy year-over-year comparisons, and the firm did pocket a tidy pre-tax gain of $16.5 million from the sale of a card club in California. However, even after backing out one-time items, earnings from continuing operations still swung from a $0.09 loss to a $0.25 profit.

That improvement drew some applause from the Wall Street crowd -- the shares rallied more than 5% on the news.

Inside the numbers
As the chart below shows, revenues improved across the board for the quarter, which helped drive property-level EBITDA up 160%. Keep in mind, though, that results at both L'Auberge Du Lac and Boomtown New Orleans have been favorably skewed by startup costs and/or the impact of hurricanes Katrina and Rita.

Property

Q3 06 Reve-nues

Q3 05 Reve-nues

Q3 06 Property EBITDA

Q3 05 Property EBITDA

Boomtown New Orleans

$46.2

$19.5

$17.2

$3.0

L'Auberge Du Lac

$79.2

$51.5

$19.8

($0.2)

Belterra

$47.4

$45.1

$11.7

$11.3

Boomtown Bossier

$24.6

$23.7

$5.6

$4.8

Boomtown Reno

$27.7

$25.6

$3.7

$5.3

Total

$236.7

$174.4

$54.0

$20.7
Figures in millions.

Starting at the bottom, business has been fairly sluggish in Reno, but the anticipated opening of a nearby Cabela's (NYSE:CAB) sporting goods store should help. And in the highly competitive Shreveport/Bossier market, operational streamlining has enabled the company to ring out additional earnings from fairly flat revenues.

Meanwhile, the firm's former flagship Belterra resort in Indiana posted modest increases in both revenues and profits. Pinnacle is planning to sink $45 million to expand the resort's hotel tower by another 250 rooms, bringing the total up to 850. The opening of a new highway within the next few months should also drive increased traffic to the property.

As mentioned earlier, the tables and slots have been busy in New Orleans, thanks in large part to an influx of construction workers. For the period, revenues in New Orleans spiked almost 140% to $46 million, while earnings soared from $3 million to more than $17 million. However, with the competition in nearby Mississippi starting to regain its footing, EBITDA continues to fall sharply on a sequential basis.

To its credit, management noted that last quarter's earnings of $17 million are down significantly from the $22 million generated in the second quarter and the $29 million in the first quarter. Nevertheless, business in the Crescent City will most likely level off somewhere north of pre-hurricane levels. Historically, EBITDA margins at the Boomtown New Orleans have been strong, and future hotel expansion over the next year should further bolster the property's recent success.

Once again, though, the L'Auberge Du Lac in Lake Charles, La., did most of the heavy lifting. Since its introduction in May 2005, the high-end resort has easily outshined the competition. During the quarter, the resort posted $20 million in EBITDA on revenues of nearly $80 million -- both ahead of last quarter.

On the horizon
In relatively short order, L'Auberge Du Lac -- which features a 26-story hotel, a marina, a Tom Fazio-designed golf course, and one of the nation's largest single-deck riverboats -- has quickly overtaken Harrah's Horseshoe in Bossier City as Louisiana's top-grossing riverboat casino.

For the moment, the property chips in approximately one-third of Pinnacle's total revenues and operating income -- but things are changing quickly. Banking heavily on an ability to continue attracting wealthy players from nearby Houston (where Pinnacle has saturated the airwaves with advertising), the company has recently unveiled plans to add an adjacent $350 million Caribbean-themed resort called Sugarcane Bay.

Collectively, the Lake Charles market -- which also includes Isle of Capri (NASDAQ:ISLE) and Boyd Gaming's (NYSE:BYD) Delta Downs racino -- has reported gross monthly gaming revenues approaching $60 million. And following Harrah's decision to pack its bags and leave town, I expect Pinnacle to pick up much of the slack.

Management also has big plans to enter the underserved Baton Rouge market, whose population has swelled with displaced New Orleans residents. The firm has recently acquired a 54-acre parcel of land, and if all goes according to plan, Pinnacle will have a stake in all four Louisiana gaming jurisdictions. However, that is only the beginning.

The firm continues plowing ahead with aggressive expansion into St. Louis, and will soon have two upscale resorts in that key market. Furthermore, it has dipped into its $308 million cash stockpile to acquire the historic Atlantic City Sands, which will soon give way to one of the most premier resorts on the boardwalk. Finally, Pinnacle has also submitted a bid to develop a massive slot/entertainment facility in Pennsylvania.

Clearly, the company is not lacking in potential catalysts to power cash flows forward.

The race tightens
Pinnacle has made great strides in recent years, evolving from a second-tier firm with a handful of mostly mediocre regional properties into an emerging leader. Since 2001, annual revenues have shot up from $500 million to more than $850 million. More importantly, operating cash flows have quadrupled, from $36 million to $141 million.

Not surprisingly, that growth has translated into healthy rewards for shareholders; the stock has delivered phenomenal annualized gains of 36% over the past five years. Yet the shares are currently trading at just 10 times trailing cash flows, a far cry from the industry average of 28.

Two years ago at this time, I referred to Pinnacle as a solid turnaround candidate, but still an "also-ran" in the gaming group. Indeed, the firm may still trail its larger rivals, but it's hard to argue that it is not closing ground.

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Fool contributor Nathan Slaughter has cheered for Pinnacle, but unfortunately has not placed any bets on the company. He owns shares of Boyd Gaming, but none of the other companies mentioned. Even card counters can't thwart the Fool's disclosure policy.