08/04/2005 11:00PM

Contrary to analyst reports, Harrah's outlook promising

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I love it when Wall Street analysts put out projections on earnings for companies and when a company fails to reach those projections, the same analysts pan the company's performance. That's like being the lawyers, judge, and jury all rolled into one.

Harrah's Entertainment released its second quarter results, and analyst comments were mostly negative.

This is the first quarter in which Harrah's included its $9 billion purchase of Caesars Entertain--ment properties and all the expenses involved. Even with all the economic variables from such a complex business deal, Harrah's announced per share earnings of 84 cents. That's up from the same period in 2004 of 79 cents per share.

Wall Street analysts universally panned the results, however. For example, Thomson First Call polled analysts as to their predicted earnings for Harrah's, and the estimate was released at 93 cents per share. Thus analysts view Harrah's as underperforming.

Harrah's stock, which had peaked at $79.69 earlier this week, has dropped about $5 since the release of second quarter earnings.

I learned a lesson about Wall Street analysts three years ago. I was interested in buying Station Casinos stock, which was selling at around $20 a share. My advisor got back to me and recommended to pass on Station Casinos because "casino industry growth is expected to flatten out." Well, casino industry growth has been so "flat" that Station Casinos stock now sells for $70 a share.

My view of Harrah's performance is long-term, and some comments made by management paint a solid future.

Gary Loveman, Harrah's chairman and chief executive officer, now controls a 43-casino empire from coast to coast. He is bullish about a burgeoning database that includes more than 40 million customers. The beauty of it all is that Harrah's properties now include diverse casinos, appealing to low, middle, and high-end players.

Loveman touched upon the mini-monopoly Harrah's has at the busy intersection of Flamingo Road and the Las Vegas Strip. There is opportunity there based on two properties, Bally's Las Vegas and the Bourbon Street Casino.

Bally's Las Vegas is an older casino on the southeast corner of the intersection. Bally's was the original MGM Grand. Rumor has it that Bally's could undergo a branding change to a Horseshoe casino, be extensively renovated, or even be rebuilt entirely. Regardless, its location makes it vital to the entire Strip.

Across Flamingo Road from Bally's is the Bourbon Street Casino, which is scheduled to close in October. Harrah's has the flexibility to use that acreage and the space behind the Flamingo hotel and casino to expand and connect its properties.

Add in the boost given to the Rio from playing host to the recent World Series of Poker, and Harrah's has a lot more to build upon than the analysts are taking into account.

Richard Eng is the turf editor for the Las Vegas Review-Journal and host of the Race Day Las Vegas Wrap Up radio show.