Isle of Capri (ISLE) Upped to Strong Buy on Solid Q3 Results - Analyst Blog

On Feb 27, Zacks Investment Research upgraded Isle of Capri Casinos, Inc.ISLE to a Zacks Rank #1 (Strong Buy) following robust fiscal third-quarter 2015 results announced on Feb 25.

Why the Upgrade?

In the third quarter, the company's revenues and earnings beat the respective Zacks Consensus Estimate and improved year over year.

Adjusted earnings of 13 cents compared favorably with the Zacks Consensus Estimate of a breakeven. Further, earnings compared favorably with the year-over-year loss of 12 cents, primarily backed by higher revenues and increased adjusted EBITDA margin.

In fact, the company's revenues of $241.1 million beat the Zacks Consensus Estimate of $226 million and increased 7.5% year over year. Strong revenues from the Pennsylvania region also aided revenues. The company's geographic diversity, which is reflected in its presence in the secondary gaming markets of the U.S., is expected to continue to boost its revenues in the near term. In fact, net revenue at all its served markets increased year over year. Notably, Isle of Capri's most profitable properties - Pompano, Boonville and Waterloo - posted solid revenues in the quarter.

Further, corporate and development expenses were $5.9 million, down $1.4 million from the prior year due to the corporate rearrangement completed earlier in fiscal 2015 and continued expense management initiatives.

The company's adjusted EBITDA of $47.2 million was up 27.6% year over year, as adjusted EBITDA in all its markets improved. Improvement in weather toward the end of the year compared with the prior-year period and increased results helped the company's results.

Further, Isle of Capri benefited from its profit improvement initiatives. For the third consecutive quarter, visits increased in the company's profitable retail customers segment. Apart from this, visits by high-end segment customers increased. It seems the company's restyled marketing programs and promotions on driving business in the top segments are yielding results.

This bullish outlook related to the results triggered an uptrend in the Zacks Consensus Estimate which moved up 17.5% for 2015 earnings to 47 cents over the last 7 days.

Other Stocks to Consider

Other stocks in the broader consumer discretionary sector which are performing well at current levels include Boyd Gaming Corporation BYD , Churchill Downs Inc. CHDN and The Madison Square Garden Company MSG . All these stocks carry a Zacks Rank #2 (Buy).

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ISLE OF CAPRI (ISLE): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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