PENN Q3 REPORT CARD

Takeaway: Midwest margins were incredible and drove the EBITDA beat. Forward guidance unchanged despite higher margins indicating that demand is soft

In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance

 

PENN Q3 REPORT CARD - PENNH

 

 

OVERALL

  • BETTER:  Midwest margins were incredible and drove the EBITDA beat.  Forward guidance was unchanged despite higher margins indicating that demand is soft.

L’AUBERGE BATON ROUGE IMPACT

  • SAME:  Slightly lower than expected adverse impact from L'Auberge Baton Rouge on Hollywood Baton Rouge but the real impact will take about 4-5 months to materialize
  • PREVIOUSLY: "Baton Rouge, L'Auberge opened in Baton Rouge. Clearly to date that's having an impact on our property. It's fairly substantial."

IMPACT OF SCIOTO DOWNS:

  • SLIGHTLY WORSE:  expect pressure from Scioto Downs to continue.  Have reduced FTEs significantly at Lawrenceburg in Q4 due to poorer performance.
  • PREVIOUSLY: "We've clearly seen an impact from Scioto Downs opening in Columbus...on our Lawrenceburg facility. We have roughly 10% of our business comes out of the Columbus market for Lawrenceburg, and we have clearly felt the impact of that."

OHIO RAMP

  • BETTER:  Toledo exhibited a strong performance above company expectations.  Early results on Columbus are in-line with management expectations.  
  • PREVIOUSLY: "Table games play has been very strong. Similar to what we're seeing in Dayton, we saw a little bit of that in Columbus. For whatever reason, and I think maybe it's simply a function that it's a less mature market and it hasn't had a lot of exposure to gaming, but we're clearly seeing that the slot business is a little bit slower building than what we might have expected to happen. I would say at Toledo, we're basically on track, but we're well ahead of track on poker and tables. So, clearly both of those markets are a little stronger in Ohio. The slot business – for whatever reason, I think it's going to just develop over time."

CONSUMER CONFIDENCE

  • SAME:  Flat consumer trends in 3Q
  • "Generally not having any expectation that we're seeing any improvement in consumer confidence or unemployment levels as we think about the balance of 2012."

CAPEX

  • MIXED:  3Q - $147 million project capex (Columbus and Toledo mostly) and $14 million maintenance.  4Q - $155.5 million project capex and $24 million maintenance
  • PREVIOUSLY: "Project CapEx is expected to be roughly $160 million for the third quarter and roughly $88.9 million for the fourth quarter. Maintenance CapEx in the third quarter was roughly $23.7 million and maintenance CapEx for the fourth quarter were projected to be around $21.2 million."

VEGAS

  • SAME:  M Resorts continued to improve margins in spite of flat revenues.  Las Vegas Locals market continues to be sluggish and PENN doesn't see that environment to improve in 2013. 
  • PREVIOUSLY: "Generally more of the same. The locals market continues to be sluggish out there. Promotional activity is slightly more rational than what we saw a couple quarters ago. And we've certainly at the M continued to pare back our marketing expenses where we believe we can improve the profitability of our revenue streams."

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more

Premium insight

[UNLOCKED] Today's Daily Trading Ranges

“If I could only have one thing of the many things we have it would be my daily ranges." Hedgeye CEO Keith McCullough said recently.

read more

We'll Say It Again: Leave Your Politics Out of Your Portfolio

If your politics dictates your portfolio positioning, the Democrats and #NeverTrump crowd out there have had a hell of a week.

read more

Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more