Casino, sports betting and entertainment operator PENN Entertainment (NASDAQ:PENN) missed analysts' expectations in Q1 CY2024, with revenue down 4% year on year to $1.61 billion. It made a GAAP loss of $0.76 per share, down from its profit of $3.05 per share in the same quarter last year.
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PENN Entertainment (PENN) Q1 CY2024 Highlights:
- Revenue: $1.61 billion vs analyst estimates of $1.63 billion (1.4% miss)
- EPS: -$0.76 vs analyst expectations of -$0.59 (29.8% miss)
- Gross Margin (GAAP): 29.6%, down from 41.8% in the same quarter last year
- Market Capitalization: $2.51 billion
Established in 1982, PENN Entertainment (NASDAQ:PENN) is a diversified American operator of casinos, sports betting, and entertainment venues.
Casino OperatorCasino operators enjoy limited competition because gambling is a highly regulated industry. These companies can also enjoy healthy margins and profits. Have you ever heard the phrase ‘the house always wins’? Regulation cuts both ways, however, and casinos may face stroke-of-the-pen risk that suddenly limits what they can or can't do and where they can do it. Furthermore, digitization is changing the game, pun intended. Whether it’s online poker or sports betting on your smartphone, innovation is forcing these players to adapt to changing consumer preferences, such as being able to wager anywhere on demand.
Sales GrowthReviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. PENN Entertainment's annualized revenue growth rate of 7.5% over the last five years was weak for a consumer discretionary business. Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. PENN Entertainment's recent history shines a dimmer light on the company as its revenue was flat over the last two years.
This quarter, PENN Entertainment missed Wall Street's estimates and reported a rather uninspiring 4% year-on-year revenue decline, generating $1.61 billion of revenue. Looking ahead, Wall Street expects sales to grow 10.9% over the next 12 months, an acceleration from this quarter.
Operating MarginOperating margin is a key measure of profitability. Think of it as net income–the bottom line–excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
PENN Entertainment was profitable over the last two years but held back by its large expense base. It's demonstrated mediocre profitability for a consumer discretionary business, producing an average operating margin of 9.7%. In Q1, PENN Entertainment generated an operating profit margin of negative 1.3%, down 13.2 percentage points year on year.
Over the next 12 months, Wall Street expects PENN Entertainment to become more profitable. Analysts are expecting the company’s LTM operating margin of 2.8% to rise to 5.5%.Key Takeaways from PENN Entertainment's Q1 Results Revenue missed but ESPN BET was a bright spot. "ESPN BET...led to record online sports betting handle and iCasino gross gaming revenue in the quarter." The company also announced the hiring of Aaron LaBerge as the new Chief Technology Officer. “Mr. LaBerge brings more than 20 years of experience at The Walt Disney Company (NYSE:DIS), most recently serving as the CTO for both Disney Entertainment and ESPN." The stock is up 2.1% after reporting and currently trades at $16.75 per share.
