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Harrah's Outlook Raised On Riverboat Strengths

Bear Stearns gaming analyst Jason Ader raised his fourth-quarter estimate to 35 cents per share and $211.8 million in cash flow, up from 31 cents per share and $199.7 million in cash flow. Ader hiked his 2002 earnings per share estimate from $2.08 to $2.14, and set a 2003 estimate of $2.35 per share.

The new fourth-quarter estimate "is indicative of the quick post 9/11 bounce back experienced by many of Harrah's regional market properties, as well as better-than-expected initial returns from expansions in Joliet (Illinois) and Metropolis (Illinois)"

Ader said Harrah's remained "well positioned in the current environment," given such factors as its geographic diversity, its focus on driving slot revenues, expansion projects at various properties around the country, its "Total Rewards" players card system, and its "strong balance sheet and accelerating cash flow."

Ader's optimism was shared by Merrill Lynch gaming analyst David Anders, who raised his fourth-quarter earnings estimate from 32 cents to 37 cents per share. Anders also hiked his 2002 estimate from $2.25 to $2.33 per share, established a 2003 estimate of $2.65 per share, and raised his 12-month price target from $38 to $42.

"Despite the economic slowdown, the riverboat markets continue to generate very solid growth and have more than recovered from 9/11," Anders wrote. "Although reluctant to fly to destination casinos, consumers have remained willing to spend leisure dollars at casinos that are within a two-hour drive.

"Without a doubt, the diversification of (Harrah's) cash flow is permitting the company not only to weather the economic downturn, but also continue to generate growth."

Harrah's stock closed Wednesday at $34.75, up 87 cents. It fell 6 cents this morning.

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