Maybe Pinnacle Entertainment (NASDAQ: PNK) sees what the Tropicana Hotel and Casino is doing for industry peer Penn National Gaming (NASDAQ: PENN) and thinks it might be able to do the same. The regional casino operator said during its third-quarter earnings call with analysts that although it’s happy with its diverse portfolio at the moment, it is open to acquiring a Las Vegas property.
Penn National bought the Tropicana last year for $360 million last year and began upgrading the property, with as much as $200 million to be spent on expanding it over the next three years. It wants to extend both gaming and non-gaming amenities to MGM Resorts’ MGM Grand across the street on the belief that it will attract more people to its own resort.
The Trop turned in a decent quarter for Penn, as did its other Las Vegas-area property, the M Resort in Henderson, though it wasn’t nearly strong enough to offset the poorer performance Penn saw elsewhere in the region.
Pinnacle doesn’t have quite the same problem, though it did experience softness as well, but says as the quarter progressed results improved. Still, while revenues were up just under 3% to $595 million, it swung to a loss of $486,000, or $0.01 per share, compared to profits of $13.7 million, or $0.22 per share, a year ago.
Although Pinnacle does have two Nevada properties — Cactus Pete’s and Horseshu Hotel and Casino — they’re in the northern part of the state and posted only low single-digit revenue growth for the quarter. Its Black Hawk resort in Colorado — which, along with those two, comprises Pinnacle’s western division — also had low single-digit growth leading to a 2.9% increase in net revenues for the segment.
The casino does have a marketing arrangement with MGM that offers members of either resorts’ rewards programs benefits and rewards at the other’s company’s properties in regions where they don’t have a presence. So members of Pinnacle’s mychoice rewards program desiring a Las Vegas experience can stay at one of MGM’s properties.
Yet a property of its own in Las Vegas just might help boost Pinnacle’s overall performance. After a sluggish period to start the year, Las Vegas is rebounding, with casinos on the Strip enjoying a 7.5% increase in revenue in September. That was a nice turnaround from August, when Strip casino revenue plunged 15%.
But Pinnacle Entertainment CEO Anthony Sanfillipo says the right deal has to come along before it will make a move, though whether bargains like Penn National got for the Tropicana may be harder to come by if Las Vegas stays on the path it’s on.
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Rich Duprey has no position in any stocks mentioned.
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