Investors cashed in their chips on Aztar ( AZR) Thursday after the casino company reported a disappointing fourth quarter. The results fell far short of expectations and prompted at least two Wall Street analysts to downgrade the stock. Others scrambled to lower estimates. Shares plummeted $4.11, or 12.5%, to $28.78. More than 2.2 million shares changed hands by late morning. Late Wednesday, Aztar announced fourth-quarter net income of $2.3 million, or 5 cents a share, down 81% from $11.7 million, or 32 cents a share, a year earlier. The average analyst estimate was for 28 cents a share, according to Thomson First Call. Revenue of $192.7 million was up 4.0% from $185.3 million a year earlier but far short of the $202.3 million Wall Street was expecting. In reaction, Bear Stearns analyst Joseph Greff slashed his rating on Aztar stock to underperform from peer perform, calling the results "sloppy." (Bear Stearns does and seeks to do business with companies covered in its research reports.) Greff wrote in a research note that his downgrade was based on expectations of a slower ramp-up of Aztar's expanded Tropicana casino in Atlantic City, N.J., a longer timeline for the redevelopment of its Las Vegas Tropicana and the company's "new willingness" to be acquisitive. "While we believe that there is value in its Las Vegas real estate, we think all of the above mentioned points will cause Aztar's shares to underperform a peer group that has relatively strong fundamentals," Greff wrote. "As such, we think the shares, at around $33, are a poor risk reward." Harry Curtis, an analyst at J.P. Morgan, cut his 2005 EPS estimate to $1.60 from $1.75 and reiterated his underperform rating on the stock. (J.P. Morgan does and seeks to do business with companies covered in its research reports.)
"In our view the keys to Aztar share performance are improved EBITDA,
earnings before interest, taxes, depreciation and amortization at the Tropicana Atlantic City, which was disappointing, and interest in Aztar's assets by financial buyers," Curtis wrote. "Aztar mentioned interest in acquisitions to spur growth, so asset sales appear to be off the table." Curtis noted that Atlantic City EBITDA plunged 44% to $7.9 million in the fourth quarter from a year before. About $2.8 million of the $6.3 million decline was caused by a monthlong strike in Atlantic City. In addition to the Tropicana casinos in Atlantic City and Las Vegas, Aztar owns the Ramada Express casino hotel in Laughlin, Nev. and riverboat casinos in Missouri and Indiana. Aztar's disappointing fourth-quarter results contrasted with those from other casino operators. Harrah's Entertainment ( HET), which is purchasing Caesars Entertainment ( CZR), beat Wall Street expectations. So too did MGM Mirage ( MGG), which is in the process of acquiring Mandalay Resort Group ( MBG).