PENN Entertainment (NASDAQ:PENN) Reports Q2 In Line With Expectations

Casino, sports betting and entertainment operator PENN Entertainment (NASDAQ:PENN) reported results in line with analysts’ expectations in Q2 CY2024, with revenue flat year on year at $1.66 billion. It made a GAAP loss of $0.18 per share, down from its profit of $0.46 per share in the same quarter last year.

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PENN Entertainment (PENN) Q2 CY2024 Highlights:

• Revenue: $1.66 billion vs analyst estimates of $1.65 billion (small beat)

• EPS: -$0.18 vs analyst estimates of -$0.25 (28.4% beat)

• Gross Margin (GAAP): 34.4%, down from 41.6% in the same quarter last year

• EBITDA Margin: 12.8%, down from 15.1% in the same quarter last year

• Market Capitalization: $2.58 billion

Jay Snowden, Chief Executive Officer and President, said: “Our retail properties delivered solid results this quarter as our best-in-class team of operators continues to execute across our diverse portfolio of market leading assets. In our Interactive segment, top-of-funnel growth, improved risk and trading execution, and refined promotional strategies contributed to better-than-expected revenue and Adjusted EBITDA results.

Established in 1982, PENN Entertainment (NASDAQ:PENN) is a diversified American operator of casinos, sports betting, and entertainment venues.

Casino Operator

Casino 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 Growth

A company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Regrettably, PENN Entertainment’s sales grew at a weak 6.7% compounded annual growth rate over the last five years. This shows it failed to expand in any major way and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or emerging trend. PENN Entertainment’s recent history shows its demand slowed as its revenue was flat over the last two years. Note that COVID hurt PENN Entertainment’s business in 2020 and part of 2021, and it bounced back in a big way thereafter.

This quarter, PENN Entertainment’s $1.66 billion of revenue was flat year on year and in line with Wall Street’s estimates. Looking ahead, Wall Street expects sales to grow 9.4% over the next 12 months, an acceleration from this quarter.

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Operating Margin

PENN Entertainment’s operating margin has shrunk over the last year and averaged 7.9%. The company’s profitability was mediocre for a consumer discretionary business and shows it couldn’t pass its higher operating expenses onto its customers.

In Q2, PENN Entertainment generated an operating profit margin of 4.5%, down 7.6 percentage points year on year. This contraction shows it was recently less efficient because its expenses increased relative to its revenue.

Key Takeaways from PENN Entertainment’s Q2 Results

We were impressed by how significantly PENN Entertainment blew past analysts’ EPS expectations this quarter. Zooming out, we think this wasn’t a perfect quarter, but it was certainly a solid one. The stock traded up 4% to $17.95 immediately following the results.

PENN Entertainment may have had a good quarter, but does that mean you should invest right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.