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Gaming Guru

Howard Stutz

Ameristar Casinos Raises Q3 Earnings Estimates

6 October 2006

LAS VEGAS -- Las Vegas-based Ameristar Casinos on Thursday upgraded its expected financial performance for the third quarter, a sign to gaming analysts that the sector could be reporting good news as quarterly earnings are rolled out later this month.

Ameristar, which operates regional casinos in Northern Nevada, Colorado, Missouri, Iowa and Mississippi, told analysts and investors that its earnings per share for the quarter ended Saturday would be about 7 cents to 8 cents higher than previously predicted.

Ameristar said the higher earnings also reflected reductions in estimated depreciation expenses, to $24 million from $25 million, and in interest expense, to $12 million from $12.5 million.

The company's operating income would also be at least $6 million to $7 million more than expected.

Ameristar will report its earnings Oct. 25.

"This announcement could also bode well for the gaming space overall, and (we) expect other operators could also see upside in the third quarter," Deutsche Bank gaming analyst Bill Lerner said in a note to investors.

He thought the results are also reflective of strong earnings by the company's casino in Vicksburg, Miss., and the Ameristar Black Hawk outside of Denver.

Bear Stearns gaming analyst Joe Greff said Ameristar may have cut its promotional expenses at its Missouri casinos, which offset decreased gaming revenue at the properties through August. Ameristar St. Charles near St. Louis was down 3 percent over the previous quarter, while Ameristar Kansas City was off 4 percent for the first two months.

In a note to investors, Greff said Ameristar raised the guidance, "on what we believe to be improved margins in Missouri, where we sense the promotional environment has cooled, and strong September gross gaming revenues."

The news didn't cause Greff to change his rating of Ameristar's stock from "peer perform," which means the shares should react in line in the same manner as other gaming stocks covered by Bear Stearns.

"At current levels, shares are an even risk-reward, in our view, as we continue to believe Ameristar will be negatively impacted longer term by competitive pressure in Missouri once Pinnacle Entertainment opens their downtown St. Louis property (in fall 2007)," Greff said.

Investors sent Ameristar shares up more than 9 percent on the opening of trading Thursday on the Nasdaq National Market. By the end of the day, Ameristar shares had gained almost 13 percent to close at $25.06, up $2.88. More than 1.3 million shares were traded, six times the average daily volume.