ISLE SHOULD BEAT

A stock in need of a catalyst.

While most regional gaming operator stocks are sitting close to their 3 year highs, ISLE is not.  In fact, ISLE is 23% off its 2011 peak.  With concerns about flooding and gas prices, this is a stock in need of a catalyst.  A solid earnings report might just do the trick.

We’ve been a big fan of regional gaming operators for a couple of months now but have emphasized the higher quality names such as ASCA and PNK.  However, a rising tide (pun intended) lifts all boats, and ISLE should benefit from better regional gaming trends as well.  Trading at 7x forward EV/EBITDA, the ISLE boat needs a jump start.

We are projecting FQ4 (April) EPS and EBITDA of $0.29 and $63.3 million, 19% and 6% above consensus, respectively.  Q1 FY2012 will likely be messy due to flooding related property closings and business interruption insurance but underlying May fundamentals were decent.  We expect management to make that clear on the conference call.