April and Q2 gaming revenues should be better than bad following an awful Q1. BYD and PENN probably guided low enough for Q1.
Call to Action:
Catalysts are lining up positive for PENN and BYD with potential in-line to slightly better Q1 earnings and sequentially better Q2 gaming revenues. PNK Q1 looks at risk.
Investors have been waiting a long time for regional gaming revenues to improve. On the heels of a disastrous December performance, we had many winter storms and brutally cold weather plus a March that surprised many folks (not us) to the downside. With Louisiana and Mississippi still to report, SS revenues are tracking right in-line with our projection of -7% for March (see our note: ANOTHER REGIONAL REVERSAL?, 4/2/2014). We expect Louisiana and Mississippi to report mid single digit declines in revenues for March.
The good news is that analysts have already lowered Q1 estimates for PENN and BYD. While there should be a few more stragglers, we think current estimates reflect reality – BYD provided its last guidance update on March 1st and PENN was necessarily conservative when it reported Q4. PNK seems to be the company most at risk for Q1. We’ll see when Louisiana releases estimates but consensus Q1 estimates of $0.42 looks $0.05-0.10 too high. For PENN and BYD, we wouldn’t be surprised with an in-line to slight beat.
This may not be the most compelling investment thesis ever, but going forward, regional gaming revenues look better than bad – still negative but decidedly less so as seen in the following chart.