With eight months in the book since Reno-based Eldorado Resorts acquired regional casino giant Isle of Capri, Wall Street is getting a clear picture of the casino company.
Eldorado, which now operates 20 casinos in 10 states, offered “a bright outlook” according to one gaming analyst, despite falling short of Wall Street expectations when it reported fourth quarter and year-end results Thursday.
On a conference call, Eldorado CEO Gary Carano said the diversification into new markets through the Isle purchase “demonstrates” the company’s core strength, which he cited as an “ability to acquire properties and operate them in a manner that unlocks previously unrealized upside performance.”
Carano said the company experienced similar success in previous acquisitions, including its property in Shreveport, La., MTR Gaming, Circus Circus Reno and the other half of the Silver Legacy resort in Reno.
In the quarter that ended Dec. 31, Eldorado reported fourth-quarter net income of $89.7 million. On a per-share basis, the company said it had net income of $1.15.
Earnings, when adjusted for one-time gains and costs, was 20 cents per share, short of Wall Street expectations, which had predicted 24 cents per share.
Eldorado posted total revenue of $428.2 million in the quarter, versus $206.4 million a year ago, which didn’t include the Isle of Capri properties.
“After regional gaming peers missed fourth quarter forecasts and offered lukewarm 2018 (guidance), Eldorado met Street expectations while offering a bright outlook outlining a path to 28 percent margins,” Macquarie Securities gaming analyst Chad Beynon told investors.
For the year, Eldorado had a profit of $73.9 million, or $1.09 per share. Revenue was $1.47 billion.
“Eldorado’s record fourth quarter results marked the conclusion of another active and productive year of growth for the company in which we extended our success in expanding margins and growing financial results,” Carano said in a statement.
The CEO told investors the company surpassed its targeted $35 million in annual synergies from the Isle transaction.
Carano said Eldorado is assessing marketing and promotional spending across its casino portfolio and looking at other ways to “optimize” operations. He cited the Isle of Capri property in Lake Charles, La., as one example. A potential sale of the casino fell through last year.
“We have identified significant cost reductions at the property based on our analysis of the operations of properties within our portfolio that have a similar revenue and competitive market profile,” he said.
Carano said the company will continue to focus on its three flagship Reno resorts – Eldorado, Silver Legacy and Circus Circus. The company upgraded nearly 1,000 hotel rooms and suites, added or redesigned eight restaurants, cafes and bars, created new public spaces and opened a new poker room and sports book.
“We believe that our spending in winter of 2016 helped drive extremely strong results at the Reno (properties) throughout the second half of the year,” Carano said, “As a result of these strong returns, we have decided to accelerate additional investment in 2018, as we expect to spend $37.5 million … for further facility upgrades.”
Carano said a similar effort will take place this year at the company’s two casinos in Black Hawk, Colo.
“We seek to capitalize on the strong economy of the Denver market,” he said.
Shares of Eldorado, traded on the Nasdaq, closed at $32.15 on Thursday, down 40 cents or 1.23 percent. Eldorado shares have fallen 3 percent since the beginning of the year.
