Wednesday, July 7, 2004 | 10:31 a.m.
SUN STAFF AND WIRE REPORTS
International Game Technology, the largest slot machine company, will add as much as 30 cents a share to net income in 2006 because of Pennsylvania's decision to allow slot machines, J.P. Morgan analyst Harry Curtis said Tuesday. Analysts also said the law may hurt New Jersey casino owners.
Pennsylvania Gov. Ed Rendell, a Democrat, on Sunday signed the legislation allowing as many as 61,000 slots at racetracks and other locations.
The addition of slots, including 15,000 to 20,000 in and around Philadelphia, will boost sales for International Game, which has about 70 percent of the world market, Curtis wrote in a report. Profit at Caesars Entertainment Inc., which has three casinos 60 miles away in Atlantic City, may be cut by as much as 12 cents in 2006 as residents wager closer to home, he wrote.
"They might not get traffic from Philadelphia like they used to," said Dan Ahrens, who holds casino stocks including Harrah's Entertainment Inc. in the $100 million he helps manage at Mutuals.com in Dallas. "Still, there's enough gamblers in New Jersey, New York and nearby areas to support Atlantic City."
International Game is expected to earn $1.32 a share this year and $1.52 next, the average estimates of 20 analysts surveyed by Thomson Financial. The two estimates for 2006 per- share profit are $1.75 and $1.82.
About 22 percent of Atlantic City gamblers come from Pennsylvania, said Michael Pollock, publisher of Gaming Industry Observer, a casino newsletter based in the city. Aztar Corp., which owns the Tropicana casino in Atlantic City, may see profit fall by as much as 25 cents a share in 2006, Merrill Lynch & Co. analyst David Anders wrote in a report, while Harrah's profit may fall by as much as 20 cents a share, he wrote.
Caesars is expected to earn 76 cents a share in 2005, the average estimate of 23 analysts surveyed by Thomson Financial. Harrah's is expected to earn $3.51 a share.
Seven racetracks, five parlors and two resorts will be allowed to add slots, Rendell said in a statement.
Caesars owns an option to purchase land in Philadelphia, which the company may develop into a gambling site, spokesman Robert Stewart said. The law won't have any "significant impact on the marketplace," in Atlantic City, he said.
Harrah's last month agreed to buy half of Chester Downs & Marina LLC, which will develop a harness-racing track six miles from Philadelphia. Harrah's is based in Las Vegas.
The Pittsburgh Post-Gazette on Tuesday identified Harrah's as a potential developer of a Pittsburgh casino at that city's Station Square site. The newspaper said Harrah's may team with Forest City Enterprises of Cleveland, co-developer of the Showcase mall on the Las Vegas Strip and the Galleria at Sunset mall in Henderson.
And Maryland, Delaware and Ohio may revisit proposed gambling expansion, which may further boost profit for IGT, Fulcrum Global Partners analyst Joseph Greff said.
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