PENN’s stock has done well as table games have taken off in West Virginia and some regional markets are finally stabilizing. We think Q3 will come in above guidance and a little ahead of the street.
PENN should beat company guidance and consensus by a decent amount when it reports Q3 earnings next Thursday. How do we know? We don’t for sure – we’d have to have inside information to know that – but we do know that numbers have trended a little better and costs shouldn’t be going anywhere, yet.
For Q3, we are projecting EBITDA and EPS of $161 million and $0.37, respectively, versus the Street at $153 million and $0.33.
The introduction of table games in West Virginia and PA should add $40MM of sequential revenues alone to PENN’s 2Q revenues of $598MM and at least $11MM of EBITDA if we assume last quarter’s margins for each respective property. Aside from WV and PA, PENN’s Mississippi properties and Bangor should have a sequential uptick in revenues. In addition, most of the racetrack properties should post positive comps. The rest of the portfolio is not as exciting with mostly flat or slightly down same store EBITDA at most of them. The two other large positive deltas from last year will be corporate expense – down $9m due to huge lobbying expenses in last year’s Q3 – and lower interest expense.
Conference call commentary will be similar to Q2 in the sense that it will be cautious, but on the margin it should be slightly more bullish. Table games play is off the charts in West Virginia and PA, and there appears to be a little more certainty and stability in most of the regional markets.
PENN and PNK still look like the regional operators with the most credible investment stories.