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Isle of Capri Casinos (NASDAQ: ISLE) is getting hammered today in the wake of its latest earnings report. This morning, the company reported that it swung to a fiscal first-quarter profit of $900,000, or 3 cents per share, while revenue for the period slipped 6.3% to $259.9 million. The results were far worse than expected, with consensus estimates on Wall Street predicting a profit of 13 cents per share on $273 million in revenue.
On the cost-cutting front, ISLE's previously planned departure from the international market is on pace, reported Chairman and CEO James B. Perry. "... we remain on track to exit our international operations in the near term, as we will exit the Bahamas no later than October 31, and expect to exit our remaining UK operations by the end of the calendar year."
Investors have been quick to punish the stock following this morning's announcement, with ISLE down 17% at its intraday nadir of $9.95. The shares are giving back some of their impressive year-to-date rally of 275%, and they're on pace to finish their second week out of three below their 20-week moving average. Now, this formerly supportive trendline could potentially switch roles to act as resistance.
ISLE's recent gains have been partially attributable to short-covering support, with short interest on the shares dropping by 14.3% during the past month and 17.7% during the most recent reporting period. However, today's troubling news is likely to put the brakes on the bears' mass exodus. If ISLE loses this reliable source of buying power, it could spell trouble for the stock during the near term.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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