Pinnacle may prosper in painful profit season

For one casino operator, maybe earnings season won't be a painful experience.

Wall Street analysts have warned investors to not expect much as casino companies report fourth-quarter results this month. Goldman Sachs gaming analyst Steven Kent said recently that the only real question is how low the numbers will fall.

Las Vegas-based Pinnacle Entertainment, however, may be one of the few bright spots this earnings season.

The regional casino owner, which operates primarily in the Midwest and South, has seen revenue climb in its key market of Lake Charles, La. Also, easing of Missouri gaming laws may help its year-old St. Louis casino.

"Pinnacle can ultimately be among the survivors in the industry and there is a chance that low expectations can be exceeded throughout 2009 and into 2010," Macquarie Capital gaming analyst Joel Simkins told investors. "Clearly, Pinnacle has transitioned from being a growth story into a value story."

The down economy and the lack of available credit has stalled Pinnacle's expansion plans in Atlantic City, Lake Charles and Baton Rouge, La.

However, the company's flagship L'Auberge du Lac resort in Lake Charles, which increased its hotel capacity to 1,000 rooms last year, is churning out positive figures. Louisiana gaming authorities said the resort reported $31 million in gaming revenue in December, a 2.9 percent increase over November and a nearly 7 percent jump from the prior December.

Simkins said Pinnacle's Lumiere Place in downtown St. Louis should benefit by the state's removal of a $500 per player loss limit in favor of Las Vegas-style gambling.

Add in upbeat numbers from Boomtown New Orleans and Simkins estimates Pinnacle's fourth-quarter revenues will jump 17 percent compared with 2007 while the company's full-year revenues will increase 13 percent.

Both predictions are lofty given the current climate. Simkins said Pinnacle benefits from stability in the Lake Charles and New Orleans economies. Employment is high in the oil industry and posthurricane infrastructure development continues.

"We are realistic that as the energy sector weakens, this could place pressure on the company's Louisiana assets," Simkins said.

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The application process begins Monday for about 1,000 casino jobs 2,500 miles east of Las Vegas in Pennsylvania.

Las Vegas Sands Corp. expects 10,000 applicants for jobs at the $675 million Sands Bethlehem, a 3,000-slot machine casino at the former Bethlehem Steel mill. Unemployment in Lehigh Valley is 6.5 percent.

"This is a bright spot in a fairly gloomy job picture," Paul Pierpoint, a dean at the Northampton Community College, told The Morning Call of Allentown.

Howard Stutz's Inside Gaming column appears Sundays. E-mail him at hstutz@reviewjournal.com or call 702-477-3871. He blogs at lvrj.com/blogs/stutz.