Tuesday, July 25, 2006

“Back in the Day,” Part II


"What that means for investors is a very consistent, highly margined, very predictable cash-flow stream," Glenn Christenson, chief financial officer, said in an interview. "We've been able to give guidance all the way out to 2007."


—Barron’s, July 24


Thus the CFO of Station Casinos dismissed Barron's concerns about whether the business model and share price of Station Casinos could endure a cyclical—or worse—decline in the as-far-as-we-know-still-booming Las Vegas economy, in an article called “Does the House Always Win?” published just this weekend.

When I see or hear that kind of unadulterated confidence in financial forecasts from a guy who ought to know better than to pretend to be able to predict precisely what the future will bring, good or bad, I buy it about as much The Beaver's mother used to buy it when Eddie Haskell appeared at the door saying:

"Hello Mrs. Cleaver, that's a beautiful dress you're wearing. Is Wallace home?"

And sure enough, today I read that the very same CFO of the very same company is revising the “guidance all the out to 2007,” as follows:

Today:


The Company is also reiterating EBITDA guidance for fiscal 2007 of approximately $630 million to $670 million and updating EPS guidance to $2.53 to $2.95. This guidance assumes that the Phase II master-planned expansion of Red Rock opens in early 2007, and further assumes an effective tax rate of 37.2% and 61 million diluted shares outstanding.

May 4, 2006:

The Company is reiterating EBITDA guidance for fiscal 2007 of approximately $630 million to $670 million and updating EPS guidance to $2.65 to $3.05. This guidance assumes that Phase II of Red Rock opens in early 2007, and further assumes an effective tax rate of 37.2% and 63 million diluted shares outstanding.


While not a whopping reduction—EBITDA stays the same—the net earnings per share range declines at both ends, despite the boost from an implied acceleration in share repurchases.

So “Back in the Day” apparently no longer means “6 Months Ago.”

It means 60 days or less.




Jeff Matthews
I Am Not Making This Up



© 2006 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

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