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Penn National Gaming Inc. Message Board

  • investora2z investora2z Jul 19, 2013 7:31 AM Flag

    Earnings will be a trigger

    The EPS guidance for Q2'13 is $0.68. Penn National had missed the analyst estimates in Q1'13, and that had led to a correction. While the revenues had increased by 8.5%, the net income had declined by about 17%. The company still compares well with its peers like Caesars (CZR) who are much worse on leverage, and have been reporting declining revenues and large losses over past few years. Penn has been able to turnaround and report profits in the last two years, though there was some decline in margins in 2012. However, the Q2 earnings have to be good because the stock has already done very well over the last one year. Even during the last one month, it has moved up by 8%. After a rise like this, there is little room for slippages. On the other hand, positive surprises could surely push the stock towards recent highs. If the market mood supports, then it could even move beyond those levels. The longer term story depends on improvement in the economic conditions and discretionary spending. It is also important that the company makes proper choices while making capital investments so that the debt does not get out of hand. Already, the debt is high ($2.63 billion) if looked in isolation. An article on motley fool has mentioned that Penn is better than its peers as it is not so much dependent on Las Vegas traffic. It is more geographically diversified. The valuations (forward P/E of 20) may seem high, but is better than many casino giants. The Markman hearing date in the patent infringement lawsuit filed by MGT Capital Investments (MGT) has been fixed recently, and there can be some more news flow on that. In the short term the earnings will be important, and margins will be an important metric to watch.

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    • Oops. No news like bad news.

    • All very true. The bottom line is how do they treat their customers? I can tell you CT has been on a downswing from a customers point of view. If mgmt. can't or won't even answer letters from long term players, they are stating they don't care. All the marketing and cheap giveaways won't get them back. There are too many other alternatives- both close to the track and in MD. I realize that CT is only one of their properties, but it's my belief it's been the most important. One customer was actually asking a casino official a question, and the other official stated "don't talk to him." I heard it, so not hearsay. Incredible, and sad.

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