Improved hotel and food and beverage revenue offset drops in casino revenue to lift Monarch Casino and Resort to higher income and record revenue in the third quarter.
Earnings per share topped Wall Street forecasts, but revenue fell short.
In a statement Wednesday, the Reno-based company, which operates the Atlantis hotel-casino in Reno and Monarch Casino Black Hawk in Black Hawk, Colorado, said net income was $10.6 million, or 58 cents per diluted share, for the three months ended Sept. 30, up from net income of $9 million, or 49 cents per diluted share, a year earlier.
The latest earnings represented a 17.7 percent jump from a year earlier; earnings per share topped the 57 cents per share consensus forecast by Zacks Investment Research-polled analysts.
Monarch has beaten its earnings per share forecast three times in the past five quarters, Zacks noted.
Adjusted earnings before interest, taxes, depreciation and amortization, a measure of cash flow, rose 5.1 percent to $18.4 million from $17.5 million.
Revenue rose 2.2 percent to $64.4 million from $63 million. Zacks-polled analysts had forecast revenue of $65.2 million. In its statement, Monarch said a new revenue recognition standard, instituted Jan. 1, boosted third-quarter revenue by $35,000.
Monarch said year-over-year casino revenue dropped 31 percent, but hotel revenue (up 25.3 percent) and food and beverage revenue (up 13 percent) increased.
In the statement, Monarch CEO and co-Chairman John Farahi said the Black Hawk property coped with heavy construction as part of a $442 million upgrade. Work on the exterior of the property’s new 23-story hotel tower is finishing, he said, and other work is progressing.
The company said it has spent $226 million on the project so far and that the $180.1 million available under its amended credit facility will be enough to fund remaining project costs.
Farahi said Monarch expects to have its expanded casino, restaurants, shopping areas and interiors of six hotel tower floors done in the second quarter of 2019 and have the remaining hotel-tower floors finished one quarter later.
Funds from operation are financing some of the construction, Farahi said, which will help the company keep an attractive debt profile as work progresses. He didn’t specify how much in funds from operation the company is spending.
Monarch warned, though, that construction delays and disruptions could arise and, labor and materials costs could fluctuate from forecasts. Furthermore, the company said it hadn’t yet agreed to a guaranteed maximum price construction contract with the project’s contractor.
Farahi said continued revitalization projects in Reno and Northern Nevada and the health of Denver, a key Black Hawk feeder market, will poise Monarch to boost free cash flow.
“With our strong financial position and attractive growth opportunities, we believe the best days for Monarch are ahead,” he said.
Nevertheless, a housing shortage may complicate Reno’s economy. The Carson City-based Nevada Appeal reported that the University of Nevada, Reno’s Brian Bonenfant told an economic forum audience this month that although Reno-Sparks and surrounding areas have added almost 10,000 new jobs in each of the past five years, new-home construction hasn’t kept up to accommodate them.
The Appeal reported that Bonenfant estimated that because of a housing shortage, the average single-family Reno home sells for nearly $400,000. So, he concluded, a family would need at least $80,000 in annual income to afford an existing home or $90,000 to buy a new home. Both are more than the current $75,268 median family income.
Monarch Casino shares fell $2.60, or 5.82 percent, Wednesday to close at $42.07 on the Nasdaq. The share price has fallen 5.6 percent in 2018.
