Viva Las Vegas? Analysts Are Generally Bullish

Are casino stocks about to get on a roll?

Despite a recent profit warning from Mandalay Resort Group (ticker symbol: MBG), gaming companies are expected to report generally strong fourth-quarter results, meeting or beating Wall Street estimates, as hotels and casinos cashed in during “millennium” celebrations, analysts said.

“We believe that business trends in Las Vegas remain strong,” said Harry Curtis of Robertson Stephens.

MGM Grand Inc. (MGG) is likely to post strong earnings as it sold out rooms at its Las Vegas properties during the New Year’s holiday and staged successful entertainment events, analysts said.

“We had a very solid New Year’s at MGM Grand and New York-New York Hotel,” said MGM Grand’s chief financial officer, James Murren. “The consensus estimate is reported at 64 cents per share, and I am comfortable with where the Street is.” MGM Grand will report fourth-quarter earnings today.

Also expected to report strong earnings for the latest quarter is Mirage Resorts Inc. (MIR), which focuses not only on gambling but also on attractions such as the art gallery at the Bellagio, fine dining and shows.

“Mirage was really a standout in Las Vegas on New Year’s Eve,” said Bear Stearns’ Jason Ader. “All the right customers were there, and they were gambling.”

According to First Call/Thomson Financial, Mirage is expected to report 19 cents a share for the quarter and 71 cents for the year, compared with 14 cents and 75 cents last year.

Las Vegas casino operator Mandalay’s warning drove down the industry’s stocks earlier this month, when the company said it would fall short of fourth-quarter forecasts because of a weak holiday season and year 2000 concerns. Mandalay shares are down 17% this year, while the other major casino stocks have had mixed results.

But analysts said this week that the problems were confined to Mandalay, and that earlier fears of a disappointing holiday season across the board may have been overdone. “When Mandalay reported its shortfall, people believed it was an industrywide thing, but it was company-specific,” said Stuart Linde of Lehman Bros.

The sector’s prospects for this year appear bright, analysts said.

Bear Stearns’ Ader said the first quarter looks solid in Las Vegas, driven by strong bookings for conventions and by “phenomenal” bookings for the Chinese New Year holiday, which begins in early February. And economic conditions in Asia are much better this year than last, which could dramatically benefit Mirage and MGM Grand, he noted.

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An Un-Trendy 10

Not everyone is looking for the next hot tech stock. Value-oriented investors might be interested in the top stock picks for 2000 from several analysts in the slumping insurance sector. All 10 of the stocks, featured in the latest InsuranceInvestor magazine, have estimated price-to-earnings ratios of 17 or less for their current fiscal year--well below the market’s average.

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Analyst Stock Ticker Wed. 52-week firm(s) pick symbol close high ABN AMRO, Nationwide Financial NFS $28.00 $49.38 A.G. Edwards and Schroder & Co. Advest Group Ambac Financial ABK 48.81 63.00 Donaldson Lufkin Travelers Property TAP 37.25 41.88 Hoefer & Arnett Professionals Group PICM 24.00 32.25 Morgan Stanley UNUMProvident UNM 29.06 62.50 Nutmeg Securities Chubb CB 56.81 76.38 PaineWebber PXRE Group PXT 12.50 22.63 Salomon Smith Barney Manulife MFC 12.19 14.38 Stephens UICI UCI 10.56 29.00 Warburg Dillon Read Mutual Risk Mgmnt. MM 16.25 43.25

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Sources: InsuranceInvestor, Bloomberg News