Can Isle of Capri Casinos Challenge Caesars and MGM Resorts?

Isle of Capri Casinos will release its quarterly report on Wednesday, and investors in the small casino company have to be pleased to see share prices back up toward two-year highs. Yet even outside Las Vegas, the domestic gaming market has a lot of competition right now, with Caesars Entertainment and MGM Resorts having locations up and down the Mississippi River basin to challenge Isle of Capri's growth.

Isle of Capri is a relatively small company, but it has properties scattered across the country, both in states along the Mississippi River as well as in Florida and Colorado. After having hit highs during the mid-2000s expansion, Isle of Capri has never completely bounced back after the recession, as the prospects for gaming in the nation's heartland have deteriorated substantially compared to the growth in international gaming. With bigger players like Caesars and MGM challenging it, can Isle of Capri meet the challenge? Let's take an early look at what's been happening with Isle of Capri over the past quarter and what we're likely to see in its report.

Stats on Isle of Capri

Analyst EPS Estimate

($0.04)

Year-Ago EPS

($0.01)

Revenue Estimate

$248.8 million

Change From Year-Ago Revenue

11.5%

Earnings Beats in Past 4 Quarters

1


Source: Yahoo! Finance.

What's next for Isle of Capri earnings?
Analysts have gotten less optimistic in recent months about Isle of Capri earnings, doubling their loss projections for the October quarter and cutting $0.03 per share from their full-year fiscal 2015 projections. The stock has held its own but failed to make any more progress from gains earlier in the year, with shares flat since late August.

Isle of Capri's fiscal first-quarter results gave investors a flavor of the difficulties that the casino company has faced lately. Revenue climbed by 5%, but the company reversed a year-ago profit in losing $4.9 million for the July quarter. Weather issues including floods and storms in the Midwest had an impact on results, hitting casino comps by 1.9%, but the company's new Cape Girardeau property helped offset revenue decreases in Mississippi and Iowa.

The benefit that Isle of Capri has over large rivals MGM and Caesars is that in large part, the two bigger companies don't focus on their middle-American operations as much as on their Vegas presence. MGM also has Macau to consider as part of its growth strategy. Meanwhile, although Caesars decided to give up on getting into the hot Asian gaming market, it's trying to deal with substantial debt and can ill-afford to focus scarce financial resources on the heartland.

Still, that doesn't mean that Isle of Capri has the field to itself. Pinnacle Entertainment recently completed its acquisition of Ameristar, making it a big player in the Midwest. Similarly, Penn National Gaming has control of a broad swath of the Midwest as well as the locations further east. Both companies could continue to try to consolidate the fragmented domestic gaming industry while also seeking lucrative new opportunities in states like Massachusetts and New York that have recently authorized new casinos in their markets.

In the Isle of Capri earnings report, watch to see whether the company can continue to push revenue up, this time hopefully with bottom-line improvement as well. With so much competition, Isle of Capri can't afford to let bad luck derail its long-term strategic plans.

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The article Can Isle of Capri Casinos Challenge Caesars and MGM Resorts? originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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