Please ensure Javascript is enabled for purposes of website accessibility

Ameristar's Mixed Signals

By Jeff Hwang - Updated Apr 5, 2017 at 5:10PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The casino firm reports uneven Q3 earnings.

Last Monday's middling earnings release for Ameristar Casinos' (NASDAQ:ASCA) third quarter seems to have been resoundingly trumped by the recent announcement that the company might be up for sale.

Ameristar declined to comment on a possible sale Monday, but I think its actions speak volumes. Last week, the company filed a report with the SEC detailing a new "change in control severance plan," providing compensation and benefits to senior-level employees in case of termination, should a sale take place.

In other words, while the company continues to develop its properties, management is certainly bracing for a sale. And as we noted a couple of weeks ago, several key players -- including MGM Mirage (NYSE:MGM), Las Vegas Sands (NYSE:LVS), Boyd Gaming (NYSE:BYD), and rival Pinnacle Entertainment (NYSE:PNK) -- may have strategic interest in Amerstar's well-positioned properties in its key regional markets. Meanwhile, the quarterly earnings report itself was a collection of ups and downs.

On the down side...
Ameristar Council Bluffs was a disappointment, posting a 3.4% decline in revenue and a 5.2% drop in EBITDA, reflecting "softer than expected market growth." The company also noted that year-to-date performance of the Resort East Chicago property acquired in September has been "significantly less than previously anticipated," with full-year adjusted EBITDA now expected to be $54 million to $55 million. In addition, that property has been hit with an additional $1.5 million to $2 million per quarter in property tax expense, as a result of a significant increase in the assessed value of the property. The company intends to contest that assessment.

On the bright side...
Ameristar Kansas City posted a 12.3% increase in EBITDA, on a slight gain in net revenue, reflecting increased efficiencies. Ameristar Black Hawk reported an 11% increase in EBITDA, on an 8% climb in net revenue.

Ameristar St. Charles (St. Louis) held up well, maintaining basically flat results despite construction disruption from the property's new hotel, road work, and a mass overhaul of the gaming floor. It also seems to have weathered the expansion of the Casino Queen, about a half-hour drive away in East St. Louis.

However, the company did say that its full opening of St. Charles' new 400-room all-suite hotel may be delayed into next quarter, though Ameristar still hopes to have 200 rooms available for December. In the meantime, Pinnacle Entertainment's $507 million Lumiere Place casino opens in downtown St. Louis on Dec. 19.

On a final positive note, the company also doubled down on its share repurchases, buying back 376,000 shares at an average price of $25.65 apiece, for a total of $9.7 million.

Though the Q3 results weren't terribly impressive and the company does face some near-term challenges, Ameristar remains well positioned and the prospects for a sale should continue to buoy the stock price.

Place your bets on further Foolishness:

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ameristar Casinos Inc. Stock Quote
Ameristar Casinos Inc.
Boyd Gaming Corporation Stock Quote
Boyd Gaming Corporation
$53.64 (-4.96%) $-2.80
MGM Resorts International Stock Quote
MGM Resorts International
$32.74 (-8.27%) $-2.95
Las Vegas Sands Stock Quote
Las Vegas Sands
$33.51 (-3.40%) $-1.18

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.