Moody's upgrades view on U.S. gaming industry
Moody's Investors Service upgraded its view of the U.S. gaming industry Tuesday, but its assessment was far from glowing.
It noted the casino market still faces a long road to complete recovery.
Moody’s, in its Industry Sector Outlook for the U.S. Gaming Industry, revised its rating of the industry to stable, up from its previous negative view. Moody’s indicated it expects no material improvement or decline over the next 12 to 18 months.
“Although monthly gaming revenue by jurisdiction varies considerably, overall, U.S. gaming revenue was flat year-over-year in March and April 2010, and it appears the trend will hold for May,” Moody’s Senior Vice President Keith Foley said in a research note to investors. “While not a stellar performance, it's a marked improvement over the consistent, and often substantial, declines of 2008 and 2009. It also has favorable implications for gaming company operating profits, a majority of which comes directly from slot machine and table game revenue.”
The debt rating agency said that while some U.S. gaming companies will continue to experience operating profit declines in the near term, Moody’s anticipates this trend will flatten during the second half of 2010 as monthly gaming revenue demonstrates continued stability and year-over-year comparisons begin to benefit more fully from aggressive cost-cutting actions taken in the second half of 2009.
The industry, with many companies carrying huge levels of debt, continues to face challenges.
“Moody's believes consumer spending on this highly discretionary form of entertainment will remain under pressure. This will make it challenging for U.S. gaming sector conditions to materially improve from their very weak levels, and for many U.S. gaming companies to reduce their significant debt burdens,” Foley said.