Casino operator MGM Mirage (MGG) Wednesday reported higher third-quarter earnings due to Las Vegas strength, but said fourth-quarter earnings would be weakened by interest on new debt.

MGM, which owns the Bellagio and MGM Grand (search) casinos, said it had lined up $7 billion in bank financing and issued new fixed-rate debt to fund the planned purchase of Mandalay Resort Group (MBG).

Citing debt costs, it set its fourth-quarter forecast below Wall Street's, sending shares down nearly 5 percent.

Some analysts said the outlook hat management is likely being a bit conservative with the forecast, given that New Year's is such a significant component to fourth-quarter earnings and we just don't have a tremendous amount of visibility there," he added.

Third-quarter net income rose to $126.9 million, or 89 cents per share, from $47.2 million, or 31 cents per share, a year earlier. The 2004 quarter included a $51 million after-tax gain from sale of a casino in Australia.

Adjusted earnings in the quarter were 57 cents per share and were in line with Wall Street expectations, according to Reuters Estimates.

MGM forecast fourth-quarter earnings of 35 cents to 45 cents per share, compared with the Wall Street consensus of 49 cents.

Third-quarter net revenue increased 6 percent to $1.04 billion. Revenue per available room, a measure of hotel-side health, rose 10 percent at Las Vegas resorts.

MGM cut its provisions for bad debt, a reflection of customers paying their debts, which added 7 cents per share to the quarter and offset a losing streak by the casino operator at table games in the quarter.

Total casino revenue rose 5 percent and non-casino revenue rose 7 percent.

MGM is one of the biggest casino operators in Las Vegas and has relatively limited holdings in other markets, making it a prime beneficiary of the tourism and convention boom in the Nevada desert city.

The company will be the No. 2 U.S. casino operator if its acquisition of Mandalay and a competing merger, between Harrah's Entertainment Inc. (HET) and Caesars Entertainment Inc. (CZR), both go through.

MGM Mirage shares were off $2.55, or 4.63 percent, at $52.50 on the New York Stock Exchange (search).