Trump Rallies Despite Weak Quarter

Updated from 9:23 a.m. EDT

Continued weakness in the Atlantic City market resulted in a sharply widened second-quarter at Trump Entertainment Resorts(TRMP Quote).

Still, shares were surging 17% in recent trading, likely because of short covering and a Standard & Poor's upgrade.

The casino operator, whose shares have fallen 70% this year, reported a second-quarter loss of $13.5 million, or 43 cents a share, widened from a loss of $4.9 million, or 16 cents a share, a year earlier.

Analysts expected a loss of 25 cents per share, according to Thomson Financial.

Revenue fell 4.6% to $244.2 million amid increased competition from new slots parlors in Pennsylvania and New York and the introduction of a limited smoking ban in Atlantic City, where Trump owns three casinos.

Trump's margins fell sharply from a year ago because of increased promotional spending in the market. The company's earnings before interest, taxes, depreciation and amortization dropped to $29.4 million, from $41.7 million a year earlier. EBITDA margins were 12% in the quarter, down from 16.3% a year ago.

Analysts at S&P upgraded Trump's stock to strong buy from buy on Tuesday. S&P said excluding special items, Trump actually reported a loss of 19 cents a share, beating Wall Street's 25-cent loss estimate.

"Despite a smoking ban and the legalization of slot parlors in adjacent states, we view (Trump's) strategy of employing yield management, a unified players club, and cutting promotional allowances as likely to boost margins," S&P said.

Shares of Trump recently were up 95 cents to $6.46.

The stock has tumbled 18% over the past week as investors predicted that the analysts' estimates for the company's results were too optimistic.

The company, which is highly leveraged, is also facing scrutiny because of worries about the credit markets. Investors will likely press management on the 1 p.m. conference call about its solvency.