Shares of casino operators were mixed Tuesday after MGM Mirage's lackluster first-quarter earnings had investors worried about economic pressures on the sector's Las Vegas results.
Gaming companies have started to see a downturn in results at Las Vegas properties as consumers curb discretionary spending due to the ongoing housing downturn, rising food and gas prices, eroding credit and recession fears.
Earlier in the day MGM, the world's second-largest casino company, reported its first-quarter profit fell to 40 cents per share, missing the 43-cents-per-share estimate of analysts surveyed by Thomson Financial.
The owner of Las Vegas Strip resorts including the Bellagio, Mirage and Mandalay Bay said Las Vegas Strip revenue per available room dropped 4 percent, with average room rates off 2 percent. Occupancy at Strip resorts also slipped, which MGM blamed partly on fewer rooms available due to a January fire at its Monte Carlo resort.
Revenue per available room, also known as revpar, is a key gauge of a hospitality company's performance.
"These (quarterly) results clearly showed a top-line deceleration from fourth-quarter results and we remain concerned that operating trends will continue to be soft throughout the balance of the year," Goldman Sachs analyst Steven Kent said in a client note.
Joseph Greff of Bear Stearns was a bit more optimistic, saying the company's Las Vegas results "were likely above the worst case scenario that had been (recently) priced in the stock."
MGM Mirage remained upbeat in a conference call with analysts, saying it expects second-quarter results for the Las Vegas Strip to be better than the first quarter. It also said it will look to improve cost control efforts further.
Chief Executive Terry Lanni also said in a statement that the company's resorts were still attracting wealthy customers and generating revenue despite the weak economy.
Shares of MGM Mirage gained $1.33, or 2.7 percent, to $49.95 in morning trading after hitting a Nov. 2006 low of $47.60 earlier in the session.
Investor anxiety about Las Vegas began to ramp up last week, when peer Wynn Resorts Ltd. reported slot machine revenue dropped in Las Vegas from $60.4 million to $52.7 million.
Chairman and Chief Executive Steven Wynn told investors during a conference call that his company would weather the current economic slowdown.
"This is about the sixth time I've been through slowdowns in Las Vegas in my 40-year career," Wynn said at the time.
Wynn Resorts' stock added 10 cents to $105.75.
Las Vegas Sands Corp. has also been pinched by the Las Vegas downturn. William Weidner, Sands president and chief operating officer, said during a conference call last week that the Sheldon Adelson-led company "paid the price" in the first quarter for an earlier decision to increase inventory for Las Vegas tourists rather than conventioneers in 2008.
Tourism traffic in Las Vegas has suffered in a weakening economy, and the company saw "lower occupancy than we planned," Weidner said at the time.
Shares of Las Vegas Sands shed a penny to $72.99.
Elsewhere in the sector, Penn National Gaming Inc. fell 61 cents to $43.23, while Pinnacle Entertainment Inc. dropped 29 cents to $15.08.
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