Penn National Gaming on Thursday reported earnings that crushed Wall Street analysts’ forecasts.
The regional casino giant said its net income was $45.4 million, or 48 cents per share, for the three months ended March 31, up from $5.1 million, or 6 cents per share, a year earlier. Analysts polled by Zacks Investment Research had expected earnings of 39 cents per share.
Revenue for Penn National was $816.1 million, up 5.1 percent from $776.2 million a year earlier. Zacks-polled analysts had expected revenue of $811.5 million for the Wyomissing, Pa.,-based company. Operating income rose 22.7 percent to $172.1 million, a company record; adjusted earnings before interest, taxes, depreciation and amortization rose 6.6 percent to $242.6 million.
“We are achieving significant benefits from our ongoing margin enhancement initiatives, which helped all three operating segments generate year-over-year adjusted EBITDA growth,” Penn National CEO Tim Wilmott said in a statement accompanying the results.”
Revenue rose in all of Penn National’s major regional divisions — 12 percent in the Northeast (eight properties plus a management contract), 15.4 percent in the South and West (also eight properties plus a management contract) and 0.8 percent in the Midwest (seven properties and a half-stake in one more).
Penn National’s shares surged on the results, closing at $29.65, up $3.39 or 12.91 percent on the Nasdaq. The shares had been down about 4 percent for the year.
Macquarie Securities gaming analyst Chad Beynon told investors that Penn “surprisingly exceeded consensus” cash flow and had “stronger-than-expected revenue growth” despite weather issues at its regional resorts.
More than half of Penn National’s properties, Wilmott said, had year-over-year EBITDA growth and 65 percent of its gambling operations boosted adjusted EBITDA margins even amid inclement-weather challenges.
“With the operating momentum across our business and significant and growing free cash flow, Penn National continues to have the financial flexibility to select from a range of alternatives to further enhance shareholder value,” Wilmott added, “including leverage reduction, additional share repurchases, and pursuing additional opportunistic, accretive tuck-in acquisitions.”
On April 12, Penn National received Illinois regulators’ approval for its planned $2.8 billion acquisition of Pinnacle Entertainment. Penn National projected the deal will close in the year’s second half.
The deal would give Penn National Pinnacle’s 16 gaming and entertainment properties in 11 sites. The Motley Fool notes the combined Penn National-Pinnacle will become the regional casino leader, with 41 properties across 20 jurisdictions; it would have 53,500 slot machines, 1,300 tables, and 8,300 hotel rooms. The Motley Fool added that Penn National expects to reap about $100 million in operational synergies from the deal, which could boost future profit margins.
“The Pinnacle Entertainment acquisition could fuel even more growth as the geographic diversity of the business improves and Penn National tries to keep gamblers in its network of resorts,” The Motley Fool’s Travis Holum wrote.
Meanwhile, on April 4, Lancaster Online reported that Penn National won a license to operate a minicasino, which that could have up to 750 slot machines and 40 table games, in western Pennsylvania, specifically Reading or southern Berks County. Penn National told the website it hadn’t yet chosen a site in a proposed 15-mile radius.
Pennsylvania in October passed gambling expansion as part of the state budget.
Gaming and Leisure Properties, the real estate investment trust spun off from Penn National in 2013, on Wednesday posted increases in first-quarter funds from operation and revenue from a year earlier. The REIT said this month said it will co-acquire Tropicana Entertainment.
