Penn National Posts Wide Earnings Miss but Revenue Tops Forecasts

Text size

The gambling and esports company Penn National Gaming reported per-share earnings that amounted to only half of what Wall Street expected even though revenue was higher than anticipated.

Its outlook for this year was in line with the consensus forecast on Wall Street.

Earnings for the fourth quarter, which ended in December, were 26 cents a share, below estimates of 52 cents. Revenue in the quarter was $1.6 billion, higher than analysts’ consensus call of $1.51 billion.

The stock gained 2% to $46.64 on Thursday. Penn National (ticker: PENN) shares are down roughly 67% from their all-time closing high of $136.47 in March.

Analyst Ryan Sigdahl of Craig Hallum Capital, which has a Buy rating on the stock and a $96 price target, thinks the stock price should be much higher despite the mixed earnings report. “The retail casinos are performing very well,” he said, pointing to a 13% increase in same-store revenue in the latest quarter despite the pandemic.

“On the interactive [digital] side, they lost less money; only $6 million, which is way better than anybody else,” he told Barron’s. Rush Street Interactive (RSI) and DraftKings  (DKNG) are forecast by analysts surveyed by FactSet to lose $25 million and $150 million in the fourth quarter, respectively, Sigdahl noted. Penn National’s interactive segment includes theScore acquired last October and Barstool Sportsbook.

Within the company’s interactive segment, Penn National anticipates this year a narrower loss of roughly $50 million in Ebitda, or earnings before interest, taxes, depreciation, amortization, than the the loss of under $100 million it estimated back in November during its fiscal third-quarter earnings call. CEO Jay Snowden attributed that to Penn National scaling its operations and infrastructure and launching in new jurisdictions.

The expectations for a narrower Ebitda loss showcase the impressive trends Penn National has for its online business, Sigdahl said.

For 2022, Penn National (ticker: PENN) estimated revenue in the range of $6.07 billion to $6.39 billion, compared with analysts’ expectations of $6.2 billion. It expects adjusted Ebitdar, or earnings before interest, taxes, depreciation, amortization, and rent, in the range of $1.85 billion to $1.95 billion. Analysts expect Ebitdar of $1.92 billion, at the upper end of the guidance range.

The company also announced a new, three-year $750 million share repurchase program.

Analysts at J.P. Morgan said Thursday they believe the fourth-quarter results were better than feared, and maintained their Overweight rating on the stock.

Jefferies analyst David Katz has a Hold rating and a $49 price target on the stock; Needham’s Bernie Mcternan has a Buy rating with a $76 price target. Both analysts issued reports Thursday after the earnings were released.

Penn National received an upgrade from Macquarie Research analysts in late January. The analysts lifted the rating to Outperform from Neutral and raised their price target to $80 from $71, saying they “believe the market is giving little to no value for the online business.”

Analysts tracked by FactSet rate the stock at Overweight with an average price target of $68.39.

Write to Karishma Vanjani at [email protected]