Sector Snap: Ohio vote buoys some casino stocks

NEW YORK - Shares of slot machine makers and casino operator Penn National Gaming Inc. climbed Wednesday after Ohio voters approved the addition of four casinos, which will mean more business for the companies.

Penn and Cleveland Cavaliers owner Dan Gilbert had spent millions trying to convince Ohio residents to vote in favor of establishing casinos in Columbus, Cleveland, Cincinnati and Toledo. The casino operator is on tap to own the casinos in Columbus and Toledo, while Gilbert will develop the remaining properties.

Ohio voters appeared to pass the referendum in part because it is expected to bring jobs and $650 million in annual tax revenue to the state, mostly for local governments. Ohio's unemployment has topped 10 percent.

It is the state's fifth major gambling referendum in the last two decades.

JPMorgan's Joseph Greff said in a client note that if the casinos house 10,000 slot machines, International Game Technology could take 45 percent of the market share, with WMS Industries Inc. and Bally Technologies Inc. each pulling in a 20 percent share of the business. This could add earnings of about 6 cents per share to IGT, 16 cents per share to WMS and 15 cents per share to Bally's, earnings probably by late 2011, he explained.

Shares of IGT gained 63 cents, or 3.4 percent, to $19.15 in morning trading, while WMS's stock rose $1.35, or 3.3 percent, to $41.80. Shares of Bally Technologies climbed $1.56, or 3.7 percent, to $43.25.

Robert LaFleur of Susquehanna Financial Group said Penn could see $90 million in earnings before interest, taxes, depreciation and amortization from the two Ohio casinos, which could add 80 cents per share to the stock.

Penn's shares added $2.11, or 8.1 percent, to $28.31. Over the past year, the stock has traded in a range of $13.68 to $35.18.

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