May 2, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of casino operator Ameristar Casinos (Nasdaq: ASCA ) climbed 11% Wednesday after its quarterly results topped Wall Street expectations.
So what: The stock has slumped in recent months on concerns over soft gaming spending, but a big first-quarter profit beat -- adjusted EPS of $0.75 versus the consensus of just $0.63 -- seems to be easing those concerns. Ameristar's consolidated operating margin even improved to 22.2% from 20.3% in the year-ago period, reigniting optimism over its profitability going forward.
Now what: Due to the planned construction of its new $500 million Lake Charles casino/hotel/spa project and recent debt offering, Ameristar now sees full-year interest expense of $109.0 million-$114.0 million, up from its prior view of $103.5 million-$108.5 million. Additionally, management expects 2012 capital spending in the range of $160.0 million-$165.0 million. So while today's results might bode well for the stock in the short term, Ameristar's still-massive debt load and capital-intensive expansion plans continue to make it a relatively risky long-term holding.
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