Anchor Gaming Inc. stock jumped more than 6 percent after the company said analysts' fourth-quarter earnings estimates "may be conservative."
Anchor stock closed Monday at $40, up $2.37, following the announcement. Since the end of April, the stock has soared 60 percent after falling from a peak of $71 a share a year ago.
The latest move came even though the company also said its chief financial officer, Sal DiMascio, has resigned. Wall Street often takes a suspicious view of a key executive leaving when a company is revising its earnings estimates.
But Anchor said there's no connection between the bullish financial forecast and DiMascio's departure. And analysts said though DiMascio was a top-flight fiscal executive, Anchor should have no trouble finding a replacement.
"Sal indicated that his reasons for leaving are unrelated to our business and the prospects for the company and are in fact focused on his outside interests, which he wants to spend more time on," said Anchor President Michael Rumbolz.
DiMascio recently bought a luxurious beachfront home in California and has commuted weekly between there and Las Vegas for several months.
"Sal did a great job, but there's no reason Anchor will have trouble getting a comparable CFO because they have a great equity story and a great growth story," said Tom Ryan of Bankers Trust Securities Corp.
"Since the compensation for top corporate officials usually includes stock, I'd assume their phones are ringing."
Rumbolz declined to expand upon the earnings announcement, which said only that "based on preliminary internal financial reports for the months of April and May, Anchor believes that analysts' estimates for the current quarter's profits may be conservative."
The consensus earnings estimate of 10 analysts who follow Anchor is 68 cents a share for the fiscal 1997 fourth quarter, which ends June 30. In the year-ago quarter, Anchor earned 54 cents a share.
So far this year, Anchor has posted quarterly per-share earnings gains of 39.5 percent, 50 percent and 36.9 percent over the year-earlier periods. For the past five years, per-share net has grown at a 41 percent clip annually.
Despite that, the stock's price performance has been erratic. That's due to Wall Street's general disdain for gaming stocks and misperception of Anchor in particular, according to Dave Ehlers of Las Vegas Investment Advisors Inc.
"Analysts and portfolio managers haven't really understood Anchor," he said. "Its revenue is 100 percent recurring and its three businesses -- a Southern Nevada slot route, its Colorado casinos and its proprietary-games division -- are all stable and growing.
"Over the long term, it is cash flow and earnings that are the primary determinants of market value."
A 70-cent per-share net for the fourth quarter would result in fiscal 1997 earnings of $2.53, Ehlers noted. A conservative multiple of 20 times earnings would equate to a stock price in the low $50s, he said.
Ehlers and Ryan also cited increasing investor awareness of the import of Anchor's revenue-sharing agreement with International Game Technology Inc. for the popular Wheel of Fortune slots.
"I think you're starting to see the results of the IGT alliance," said Ryan. "That was something that was in the incubation stage over the last six months and this will be the first quarter you'll see an effect on earnings.
"It's a deal where Anchor splits the profits with IGT. But because Anchor has only 13.5 million shares outstanding compared with IGT's 119 million, the impact on Anchor's per-share net will be far greater."
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