Updated from 12:02 p.m. EDT

The red-hot casino sector appears to be taking a breather, with record quarterly earnings from Caesars Entertainment ( CZR) and International Game Technology ( IGT) failing to inspire a wave of buying, while Boyd Gaming ( BYD) stock plunged after earnings slumped from last year's quarter.

Caesars announced first-quarter net income of $79 million, or 25 cents a share, nearly double the $41 million, or 14 cents a share, it had a year ago. Excluding all items, the company earned a record $71 million, or 23 cents a share, easily topping the 18-cent profit expected by Wall Street and 73% higher than last year's quarter.

First quarter revenue also set a record, coming in at $1.2 billion, up 10% from the year-ago $1.1 billion and slightly higher than the $1.14 billion expected by analysts. Shares of the company were off 3 cents, or 0.2%, to $14.29, in part because the casino operator failed to raise earnings guidance above current expectations. (In a story from earlier this week , TheStreet.com warned that stocks could fall if gaming guidance doesn't come up again.)

But while Caesars first quarter easily topped expectations, the company's new guidance for the second quarter is merely in line with analyst estimates. The company expects second-quarter earnings to come in between 15 cents and 17 cents a share, against the current consensus estimate of 16 cents a share, according to Thomson Financial.

For fiscal 2004, however, Caesars said that earnings would come in between 64 cents and 68 cents a share, which would be above current expectations of a 60-cent profit.

"We showed substantial strength in all of our regions," said Wallace Barr, CEO and president. "We posted record results in the West, and reported our second-best performance ever in the mid-South. In the East, our results were significantly better than expected, given increased health care costs and the presence of new competition."

While all of its markets were strong, the surging Las Vegas gaming market drove Caesars' earnings growth -- a trend noted by Harrah's Entertainment ( HET ) and Station Casinos ( STN ) in earnings releases earlier in the week. Earnings before interest taxation depreciation and amortization from Caesars Las Vegas Strip properties rose 48% year-over-year, with EBITDA from Caesars Palace up 74%.

Boyd's Lone Bright Spot: Borgata

While both Caesars and IGT posted record quarterly results, Boyd Gaming, which competes against Station Casinos for the Las Vegas locals market, announced earnings that fell from year-ago levels, stung by an adverse tax ruling from the state of Indiana.

The company said net first quarter income came in at $13.5 million, or 20 cents a share, down from $16.4 million, or 25 cents a year ago. On an adjusted basis, excluding all charges, the company posted earnings of 29 cents a share, matching Wall Street expectations. Just prior to the release of Boyd's earnings, shares were up 2.5% but quickly reversed on the news and were lately off 33 cents, or 1.3%, to $24.74.

Revenue came in at $330 million, up from $322 million a year-ago, fueled by solid performance of the Stardust and Sam's Town Las Vegas. In another bright spot, the Borgata, a joint venture between Boyd and MGM Mirage ( MGG), generated $40.1 million of EBITDA in the quarter, with margins of 27.5%, both improvements from the previous quarter. Also, the Borgata's net gaming revenue came in at $140 million, up from $122 million the previous quarter.

"Borgata's upscale Las Vegas-style gaming experience has been an important part of attracting players," said Bob Boughner, Borgata's CEO. "They are clearly very comfortable in the environment we provide and which we believe other Atlantic City properties will be hard-pressed to duplicate."

But for Boyd, which saw EBITDA at the properties it wholly owns fall to $73.8 million from $77.5 million a year-ago, the Borgata was a lone bright spot in the first quarter.

IGT Matches, Shares Fall

IGT, which makes slot machines for companies like Caesars, announced second-quarter net income of $116.9 million, or 32 cents a share, up from $87.1 million, or 25 cents a share, a year ago. But IGT's quarter only matched Wall Street expectations, which have been soaring as IGT continues to add new customers.

With IGT's stock up more than 30% year-to-date, investors moved to sell the news, dropping shares $2.50, or 5.4%, to $44.08 on Thursday afternoon.

Revenue came in at $636.1 million, up 20% from $529.1 million the previous year and better than the $599.7 million expected by analysts. The casino industry's move to replace current slot machines with coinless slots continues to drive IGT's earnings, with sales of its EZ Pay machines up 43% vs. last year.

"The diversification of our business continues to yield consistent earnings and cash flows," said T.J. Matthews, CEO. "Our industry leading technology culminated in record top-line revenue and operating income during the quarter on the strength of record domestic replacement sales and product sales margins."

All told, IGT sold 45,400 machines in the second quarter, up more than 30% from the 34,800 it sold a year ago. Profits from machine sales came in at $191.8 million, up 56% year-over-year, while revenue came in at $362.4 million, up 42% year-over-year. Profits rose faster than revenue thanks to IGT fat profit margins on the machines it sells, which came in at 53% up from 48% last year.

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