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PENN: RISK TO Q4

Similar to the rest of the Regionals, PENN could miss Q4 projections.  2010 commentary will likely drive the stock.

 

 

PENN will report Q4 EPS on Thursday morning.  We expect a miss.  Street is at $0.19 and we are projecting $0.16.  There is always the potential for a lower tax rate, lower corporate expense, etc., but we believe the underlying property metrics will disappoint.  Looking ahead, PENN should provide its first look at 2010 and again we think the guidance will come in below consensus estimates.  We are projecting $1.27 and $598 million in EPS and EBITDA, respectively versus the Street at $1.40 and $639 million. 

"YOUTUBE" FROM Q3 RELEASE/CONFERENCE CALL

Trends

  • “We obviously continue to feel challenged with the softening of the consumer on a macro basis. As you see economic data coming out regarding the de-leveraging of the consumer and increased savings levels from them, it's certainly is reflective in what we are seeing in our demand and our businesses.”
  • “Visitation continues to be flat, in some cases actually like Lawrenceburg showing growth, but clearly spend-per-visit and time-on-device is expecting many of our businesses, even though we showed slight revenue growth year-over-year.”
  • “There is no question we are seeing the migration down in terms of customer where they are still coming, but they are playing at lower periodical levels than they had in prior year, any even in prior quarter, so that’s obviously is affecting the top line of business, we continue to be appropriately aggressive in adjusting our cost structures, our labor levels , our marketing spend.”
  • “It’s more of the same as we saw in the second quarter and as we highlighted in our results the month of August is really the softest we saw in the third quarter.”
  • “I think we haven’t seen any change in any of the trends in October that we’ve seen in the third quarter.”
  • “We saw in the third quarter that the trends continued to decline as we look at year-over-year numbers. So we are not seeing any recovery yet from the consumer in terms of those metrics that I outlined.”
  • “Our business are not declining as much as our spend-per-visit. And I don’t think that is kind of at least it’s not a situation where the customers don’t like our products they just don’t have the money that they used to have to spend on.”  

Other

  • Lawrenceberg: “We are not getting growth in our VIP segments that we had hoped for and we recognized that we are working right now and improving the non-gaming amenities in Lawrenceburg. We are going have a new meeting space complete late this year, early next year. So that we can conduct more VIP special events in a high quality environment on the casino floor. And we are improving the tiered restaurants that are on that third level in that space, which will be finished in the late second quarter, early third quarter of next year.”
  • “Looking into the fourth quarter, we’ve got maintenance CapEx of roughly 36, project CapEx of 49 and that includes Maryland, Joliet and again some expenses in Lawrenceburg to come up with this whole.”
  • What % of cost cuts are sustainable? “I think when you look at what’s been done if volumes come back and we start showing growth, yeah there will be some of that, but I would think two-thirds of it is sustainable.”