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Why AmeriStar Casinos Shares Popped

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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.

Interested in more info on Ameristar? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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Ameristar Casinos CAPS Rating: No stars