PRE-ANNOUNCEMENT POTENTIAL

The good news is that gaming/lodging earnings season is still over a month away. The bad news is earnings pre-announcements could happen at any time.

Many companies in the space no longer issue formal guidance so they may not feel the need to pre-announce. Generally, earnings and guidance look at risk. However, if Isle of Capri’s disastrous FQ2 with, nevertheless, an-up move in the stock is any indication, investors will generally shrug off any shortfalls.

The following companies have pre-announced in the past:

• WYNN – LV and Macau are under pressure. WYNN pre-announced negatively for Q3 (on 10/13) and could do so again for Q4. We think WYNN is very well positioned long-term but near term earnings could disappoint.
• PENN – The company pre-announced negatively on October 2nd so there is precedent. PENN, more than any other company should benefit from being on the right side of the liquidity trade. However, the near-term remains difficult. Lower gas prices have not yet made a meaningful difference. A pre-announcement is possible here as well but probably wouldn’t change the long term thesis.
• ASCA – The removal of the Missouri loss limit should offset some of the difficulty elsewhere. We do not expect any pre-announcement.
• BYI – We believe BYI is likely to meet or exceed FQ2 estimates. Although they have pre-announced favorable results in the past, they are unlikely to do so this quarter in our opinion.
• MAR – Marriott will probably miss earnings expectations and will most certainly lower forward guidance. We do not expect an update earlier than their regular earning release, however.

The following companies do not provide guidance and historically have not pre-announced earnings:

• BYD – BYD’s strong liquidity position vis-à-vis Station Casinos, its primary competitor in the Las Vegas locals market, should result in growing market share. However, this will take some time and in the meantime results could fall below sell-side estimates. Since management does not provide quarterly guidance we do not expect a pre-announcement.
• IGT – Considering the number of new casinos and expansions opening in the quarter, IGT should meet consensus expectations.
• WMS – We expect WMS to handily beat consensus earnings expectations. However, as we’ve written about extensively, slot sales should be down significantly in 1H CY2009. Analysts continue to project almost 10% revenue growth in that period. Management should cut forward guidance in their FQ2 earnings release.
• LVS – We expect Macau and Las Vegas to disappoint again in Q4. Any pre-announcement would likely coincide with an update on financing.
• MPEL – Macau centric, not good for earnings. Haven’t pre-announced since going public last year.
• HOT – Starwood could make the Q4 number but forward guidance should come down again. The company does not typically pre-announce.