Penn National Gaming (PENN): Zacks Rank Buy

Zacks

Penn National Gaming (PENN) sees higher estimates following several beats making the stock a Zacks #1 Rank (Strong Buy).

Company Description

Penn National Gaming owns and manages gaming and pari-mutuel properties. The company is involved in hotel, dining, retail, admissions, program sales, concessions and racing operations. As of February 2, 2012, it had interests in 25 facilities in 18 jurisdictions. Penn National's facilities featured approximately 27,700 gaming machines, approximately 600 table games, 2,400 hotel rooms, and 1.1 million square feet of gaming floor space. The company was formerly known as PNRC Corp. and changed its name to Penn National Gaming in May 1994. Penn National Gaming was founded in 1972 and is based in Wyomissing, Pennsylvania.

Four of the Last Five Quarters Were Beats

Penn National Gaming has topped earnings estimates in four of the last five quarters. The average surprise for those beats was $0.07 or 14% more than the Zacks Consensus Estimate. The beat that moved the stock the most was the following the March 2011 quarter, where the company posted earnings of $0.48, $0.08 ahead of the Zacks Consensus Estimate for a 20% positive earnings surprise. The stock advanced by a little more than 7% following the earnings release.

The lone miss occurred in February of 2012 when the company reported earnings for the December 2011 quarter. The one cent miss was a 2% negative earnings surprise, but the stock moved down by less than 1% following the report. The stock moved lower by almost 7% following the September 2011 report which was a beat of 12%..

Penn National Gaming Most Recent Reported Earnings

On April 19, 2012 the company reported revenue of $736 million, roughly $33 million ahead of the Zacks Consensus Estimate and up from $667 million reported in year ago quarter. In addition, earnings per share came in at $0.73, $0.14 higher than the Zacks Consensus Estimate of $0.59. The beat of nearly 24% was the largest beat in the last five quarters and the stock moved higher by more than 5% as a result.

Penn National Gaming Sees Earnings Estimates Increase

Following the most recent earnings release, Penn National Gaming has seen its earnings estimates move higher. In March 2012 the Zacks Consensus Estimate was calling for 2012 earnings of $2.25. Following the most recent beat of $0.14, estimates for the year moved higher by $0.25 to $2.50.

Valuations

The valuation picture Penn National Gaming is attractive. Trailing PE of 18.8x is lower than the industry average of 23x and the forward PE multiple shows an even bigger discount at 18x versus the 23x industry average. The 1.8x price to book multiple for Penn National Gaming is slightly higher than the 1.5x industry average. The price to sale multiple of 1.2x is lower than the industry average of 1.5x. Overall, the valuation of Penn National Gaming is very attractive.

The Chart

The price and consensus chart shows a significant move in earnings estimates in mid-2011. The stock, however, did not move that much following the increase. A flat 2012 consensus line shown in red on the chart only recently has seen an increase in estimates. With the 2013 consensus line well above the stock price indicates that the stock is undervalued. Penn National Gaming is Zacks #1 Rank (Strong Buy).

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Penn National Gaming - ticker PENN  >

Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service

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