Updated from 9:21 a.m. EDT

MGM Mirage's

( MGG) big earnings beat Tuesday sparked a rally in casino stocks as investors found still more evidence that the gambling boom is far from over.

The Las Vegas company, which expects to become the world's second biggest casino operator with its pending merger of

Mandalay Resort Group


, reported first-quarter net income of $111.1 million, or 75 cents a share, up 4.9% from $105.8 million, or 72 cents a share, a year before. MGM Mirage attributed the growth to higher room rates and robust gambling volume.

Adjusted earnings, which is what Wall Street uses to gauge the company, totaled 87 cents a share, up from 70 cents a share a year before and smashing the 75-cent analyst consensus from Thomson First Call. Adjusted earnings exclude discontinued operations, start-up expenses, restructuring costs, property transactions and losses from early debt retirement.

The outperformance follows a bullish preannouncement from rival

Harrah's Entertainment

( HET) earlier this month. Harrah's, which will become the world's biggest casino operator when it closes its acquisition of

Caesars Entertainment

(CZR) - Get Report

boosted first-quarter EPS expectations by more than a dime.

Even after the Harrah's preannouncement, some investors remained nervous that foul weather and higher gasoline prices would discourage visits to Las Vegas and dampen first-quarter results at other companies.

"MGM's EPS should convince the street that demand and pricing trends in Las Vegas are powerful," says J.P. Morgan's Harry Curtis in a research note. J.P. Morgan does and seeks to do business with companies covered in its research reports.

MGM Mirage shares gained $1.63, or 2.34%, to $71.36, on the earnings news. Other casino stocks were also on a roll, with the Dow Jones U.S. Gambling Index up 1.3%, outpacing broader market indexes.

MGM Mirage said first-quarter revenue was $1.20 billion, up 13% from $1.07 billion a year earlier and topping the $1.16 billion analyst consensus. Revenue growth was driven by increased visits to Las Vegas and a solid convention calendar, which allowed MGM Mirage to jack up room rates. At the same time, visitors gambled more, especially around the Super Bowl and Chinese New Year.

"The excellent operating results of the first quarter continue to demonstrate the power of our focused strategy, and we continue to build momentum leading up to the combination with Mandalay Resort Group," said Terry Lanni, MGM Mirage's CEO.

With so many visitors checking in to Las Vegas and other gambling destinations, MGM Mirage saw occupancy and room rates rise, even though it had more rooms available because of its December expansion at the Bellagio. Revenue per available room, a key industry metric also known as revpar, jumped 15% from a year ago. The average daily room rate rose to a record $155 from $138, and occupancy increased to 92% from 90%.

Casino revenue was also on the rise, up 10% year over year, as overall table game volume gained 9% and baccarat volume surged 39%. Visitors were also busy at the slots, where revenue surged 13%. Slot revenue was up more than 30% at the Bellagio in Las Vegas due to that resort's recent room expansion.

Looking ahead, MGM Mirage expects same-store revpar to grow about 10% in the second quarter and adjusted EPS of 70 cents to 75 cents. The average analyst estimate is for EPS of 74 cents.

J.P. Morgan's Curtis says some investors might be concerned that guidance is only in-line with current Wall Street expectations. He adds, however, "Recall MGM Mirage's historic modus operandi: it usually reaffirms Street estimates and never moves the number up no matter how strong current trends are."