CIBC World Keeps Sector Underperform on Churchill Downs

Analyst William Schmitt cites the racetrack operator's lowered guidance ahead of efforts to enter the casino business

CIBC World reiterates the sector underperform rating on Churchill Downs (CHDN ).

Analyst William Schmitt says this is the second straight quarter that management has cut guidance due to additional expenses related to ballot initiatives in California and Florida. The racing company and parent of the Kentucky Derby has been lobbying to break into the "racino" business -- horse racing plus casinos. He notes that although both initiatives would be significant growth drivers for the company if approved, outcomes of both processes remain fluid and face formidable challenges by governors of both states.

Schmitt notes that the company cut its 33 cents to 38 cents third-quarter earnings per share guidance to a 29-cent loss, and cut the $1.44 to $1.53 2004 earnings per share outlook to $1.00 to $1.05 earnings per share. He placed his earnings per share estimates of 35 cents for the third-quarter, and $1.42 for 2004, under review. He says the company will hold a conference call for its third-quarter earnings on Oct. 20.