Penn National Gaming, Inc. (Nasdaq: ) is expected to report its second quarter earnings at 7:00 a.m. ET on Wednesday, July 29.
Penn is a diversified, multi-jurisdictional owner and operator of gaming properties, as well as horse racetracks and associated off-track wagering (OTW) facilities. In aggregate, Penn National’s operated facilities feature over 26,300 gaming machines, approximately 400 table games, over 2,000 hotel rooms and over 959,000 square feet of gaming floor space.
In the quarter ended March 2009 (Q1), Penn reported earnings per share of $0.4 better than the analysts’ consensus estimate of $0.335 by 19.4%. The first quarter 2009 property level EBITDA margins of approximately 28.6% remained consistent with 2008 levels, reflecting the success of the revenue enhancement and cost containment strategies undertaken by the company’s local management teams to preserve margins in the current environment. Penn National ended the first quarter with approximately $738 million in cash and cash equivalents and total debt of $2.4 billion.
Analysts’ estimates for the quarter ended June 2009 (Q2) range from a low of $0.33 to a high of $0.44, with a consensus of $0.363. For the quarter ending June 2009, the consensus EPS forecast has remained the same over the past week at $0.363 and remained the same over the past month at $0.363. Of the 15 analysts making quarterly forecasts, 1 raised and 2 lowered their forecast.
The company is expected to earn net revenue of $600 million in Q2 2009, compared to $620.6 million in the previous year. Net income as per GAAP is expected to inch up in Q2 but the company’s earnings per share is expected to be down due to dilution effects. The second quarter results are expected impacted by 1) temporary closure of Joliet property due to fire, 2) the 3% horse racing tax surcharge in Illinois (will impact Empress Casino Hotel and Hollywood Casino Aurora), 3) $41.9 million depreciation and amortization charges, and 4) $7.1 million of non-cash stock compensation expenses.
The company is poised for robust growth in 3Q09 and beyond. Penn National Gaming is also poised to benefit from the recent capital expenditure incurred by it. The company’s healthy balance sheet and potential expansion opportunities are expected to drive a premium valuation for the company in the near future.
The recent agreement between Ohio Governor Ted Strickland and state lawmakers which allows racetracks to install slot machines would be helpful to the company. Penn National Gaming Inc would be able to add slots to its racetrack in Toledo, Ohio but would face increased competition for its largest riverboat in Lawrenceburg, Indiana. The company, believed to be interested in acquiring a Las Vegas Strip property, and has taken a 1% interest in a slot machine manufacturing company.
For the year ending December 2009, the consensus EPS forecast has remained the same over the past week at $1.445 and increased over the past month from $1.433 to $1.445 (0.84%). Of the 11 analysts making yearly forecasts, 1 raised and 2 lowered their forecast. Currently, the stock is trading at $33.18 (20x 2010 EPS), compared to the 52 week range of $11.82-$35.37. The stock seems to be reasonably valued. There seems to be good upside possibility with in the remainder of 2009.
