PENN: GUIDANCE STILL TOO LOW

Penn raised guidance in conjunction with its earnings release last week.  We think it’s still too low.

 

 

This won’t be a long post.  We just want to make it clear that we think PENN’s 2010 guidance is too conservative.  We thought so when it was lowered to a dollar in the Q4 earnings release, and we still think so.  After a much better quarter, driven by impressive cost controls, management raised full year EPS and EBITDA guidance to $1.14 and $578 million, respectively. 

 

We are now at $1.23 and $590 million, respectively, and we’re not actually positive on the outlook for regional gaming revenues.  We don’t see a v-shaped recovery.  Gas prices (a statistically significant variable) are higher than last year and gaming spend has been declining as a percentage of discretionary spending since housing cracked in late 2007. However, PENN management appears to be even more conservative than us and that is a good thing for long investors.

 

Can PENN work in our pessimistic environment? We certainly are not as positive as we were on the regionals in March.  However, we remain bullish on PENN since the numbers are beatable and new market growth will be high ROI for the company.


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