We’re below the Street for Q4 but PNK has underperformed and light Louisiana numbers are well-known.
After making or beating expectations for two years, PNK could report 4Q11 results below expectations. We are projecting net revenue of $274MM and adjusted EBITDA of $58.7MM, which is 4% below the Street. PNK could underperform over the near-term as questionable ROI on new projects and soft revenues could continue to provide an overhang on the stock. However, the relative weakness of the company’s Q4 report is probably well-known at this point.
While the Q4 is always seasonally weaker than Q3, some properties underperformed this quarter. L’Auberge gaming revenues were only up 4% YoY after an 11% rise in 3Q. Margin estimates seem a bit aggressive to us. Margin improvement of 320bps are difficult to fathom. Last quarter, PNK’s margins only improved 1.4%. Adding back the $1.7MM of ‘unusual’ expenses from last quarter, PNK’s margins would have been only 50bps better. Going forward, margin comps are a lot more difficult than in the first half of 2011.
Other assumptions:
- Corporate expense: $6.7MM
- Stock comp: $1.7MM
- D&A: $25.8MM
- Net interest expense: $24.0MM
- Same effective tax rate of 7.5% as for the first 9 months of the year