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Best of Howard Stutz

Gaming Guru

Howard Stutz

Penn National profits beat expecations

24 April 2009

LAS VEGAS, Nevada -- Regional casino operator Penn National Gaming posted a first-quarter profit that exceeded Wall Street's expectations, but the company's infatuation with Las Vegas was still foremost with analysts.

Officials from Wyomissing, Pa.-based Penn National, which operates 19 casinos and racetracks, said the company remains interested in acquiring a Strip casino. Penn National, which has almost $1.5 billion in cash available, has been linked in recent months to acquisition rumors along the Strip.

"Time alone will tell whether we can find the right opportunity at the right price," Penn National Chairman and Chief Executive Officer Peter Carlino said Thursday in response to a question during the company's quarterly earnings conference call.

"There's really nothing else to be said about that," Carlino said. "And I'm frankly very sorry that all the said speculation has been out there. That issue has got much, much, too much attention."

Carlino said articles linking Penn National as the buyer of The Mirage, or other casinos owned by debt-heavy MGM Mirage and Harrah's Entertainment, were not helpful. MGM Mirage and Harrah's may have to shed some of their casino holdings in order to pay down debt.

"We never publicly have said that we want anything more than a single property on the Strip if we can claim one. That still remains our interest," Carlino said.

Penn National reported net income of $40.7 million for the three months that ended March 31, or 38 cents a share. A year ago, the company's net income was also $40.7 million, but earnings per share was 46 cents because the company had fewer shares outstanding. Analysts polled by Thomson Reuters expected a profit of 33 cents.

Penn National's revenues in the quarter were $612.2 million, a less than 1 percent drop compared with $613.5 million a year ago.

JP Morgan gaming analyst Joe Greff said Penn benefitted because regional gaming jurisdictions are getting better results than the major destinations like Las Vegas and Atlantic City.

"These were solid results in light of extremely tough industry fundamentals, and we believe this reflects the health of Penn's markets," Greff said.

Analysts are interested in when Penn will buy on the Strip and what the company acquires.

Carlino couldn't predict a timetable.

"We don't need to have the largest property. We don't need to even have necessarily the best property," Carlino said. "We need a good property. There are actually quite a few locations that could serve our purpose, some of which might surprise you in their lack of grandeur."

Penn National profits beat expecations is republished from