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Penn National (PENN) Q1 Earnings and Revenues Miss Estimates

Zacks Equity Research

Penn National Gaming, Inc. PENN reported first-quarter 2019 results, wherein both earnings and revenues missed the Zacks Consensus Estimate after delivering a beat in the preceding quarter. Following the quarterly results, shares of the company declined 4.8% on May 2.

Adjusted earnings came in at 35 cents per share, missing the consensus estimate by a couple of cents. Net revenues totaled $1,282.6 million, which lagged the consensus mark of $1,289 million but surged 36.4% from the year-ago quarter number.

The Northeast segment reported revenues of $550.6 million, up 20% year over year. At the West, Midwest and South segments revenues came in at a respective $158.7 million, $271.3 million and $291.9 million, up 61.9%, 46.2% and 361% year over year. Meanwhile, the Other segment reported revenues of $10.1 million, down from $10.5 million.

Penn National Gaming, Inc. Price, Consensus and EPS Surprise

Penn National Gaming, Inc. Price, Consensus and EPS Surprise | Penn National Gaming, Inc. Quote

Let us take a closer look at the numbers

Inside the Headlines

Penn National’s income from operations in the first quarter totaled $182.4 million, up from $10.3 million registered in the prior-year quarter. Adjusted EBITDAR increased 38% from the year-ago quarter to $391.4 million. Also, adjusted EBITDA margin expanded 80 basis points to 30.5%.

Meanwhile, the traditional net debt ratio declined to 2.60x, and gross and net leverage, including master lease obligations, decreased to 6.09x and 5.79x, respectively.

Other Financial Information

Cash and cash equivalent at the end of the first quarter increased to $400.3 million compared with $479.6 million at the end of Dec 31, 2018. Further, bank debt as of Mar 31, 2019, were $1,877.9 million, down from $1,907.9 million at the end of Dec 31, 2018.

Second-Quarter and 2019 Guidance

For the second quarter, net revenues are expected to be $1,314.3 million, reflecting a 58.9% rise from the year-ago quarter. Full-year revenues are anticipated to be $5,173.1 million, down from the previously anticipated $5,207.7 million. Revenues are projected to rise 44.2% year over year.

Adjusted earnings for the second quarter are predicted to be 35 cents compared with 57 cents registered in the prior-year quarter. Meanwhile, earnings for 2019 are anticipated to be $1.36, down from 2018 figure of 93 cents.

Other Developments

Penn National, which is in the process of integrating Pinnacle properties, has provided an update about the cost synergies. The company said that it had already achieved $40 million in cost synergies as of Mar 31. It expects to achieve at least $115 million of cost synergies by 2020 end, with $55 million in 2019 and $65 million by 2020.

Penn National also added that the acquisition of Greektown’s operations, valued at $300 million, will help drive its business.

Moreover, the company’s development projects in Pennsylvania, which include the $120 million Hollywood Casino York and the $111 million Hollywood Casino Morgantown, are on track.

Zacks Rank & Key Pick

Penn National, which shares space with Boyd Gaming Corporation BYD and Caesars Entertainment Corporation CZR, currently carries a Zacks Rank #3 (Hold). A better-ranked stock worth considering in the same space is Las Vegas Sands LVS carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Las Vegas Sands’ current-year earnings are likely to witness 0.3% growth.

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