Ahead of the Bell: Gustav and Gaming

Casino owners with properties in the Louisiana and Mississippi gulf coast could be hurt by Tropical Storm Gustav, which tore through the Caribbean and is now threatening to build into hurricane status with a path toward the U.S. Gulf coast, said a Brean Murray Carret & Co. analyst in a note Friday.

Weather forecasters expect the storms to hit the gulf coast late Monday or early Tuesday.

Casinos in Mississippi, like their counterparts nationwide, have been hit by high gasoline prices and reduced travel, while also competing with new Indian reservation casinos in Florida, one of that region's chief feeder markets. The impact of Gustav could be a harbinger to this year's hurricane season.

The storm could dampen travel over the holiday weekend to Pinnacle Entertainment Inc.'s Lake Charles, Louisiana property, L'Auberge du Lac, which is a two hour drive from Houston, said analyst Daniel Fidell. Travel has already been hurt by the sluggish economy and high gas prices. The company makes 43 percent of its property-level earnings before interest, taxes, depreciation and amortization, or EBITDA, from its Lake Charles property and another 28 percent from its Boomtown Casino in New Orleans, he wrote.

Isle of Capri Casinos Inc. gets 15.7 percent of its EBITDA from the Lake Charles market, while another 5.5 percent comes from Biloxi. Though the significance of Gustav may be hard to predict, the storm could reduce already-low chances that third-quarter results will help boost shares of Pinnacle and Isle of Capri, Fidell said.

Penn National Gaming generates about 6 percent of its adjusted earnings from the Mississippi gulf coast, with properties in Biloxi and Bay St. Louis, while another 7.6 percent comes from Baton Rouge, Louisiana. The Baton Rouge casino is mostly frequented by local residents and should be relatively unaffected by hurricane predictions, Fidell said.