Regional Casino Q3 Earnings Could Impress, Analyst Has Penn Concerns

Third-quarter earnings time of year starts inward solemn next week, and downtrodden shares of regional gambling casino operators could render investors something to talk of the town about. Gross gaming revenue (GGR) trends inward the mathematical group remain sturdy.

That, despite expectations to the contrary, prompted analysts before this twelvemonth to number downward GGR revisions for the sec half on a slew of regional cassino operators.

In a note to clients, Philip Roth Washington analyst Edward VI Engel says recent management commentary suggests demand trends were calm inward the July through and through September period. That supports the whim that third- and fourth-quarter GGR should surprise to the upside, pavement the way for earnings before interest, taxes, depreciation, and amortisation (EBITDA) beats.

Regional GGR grew 1.9% YoY inward Aug, with 3Q22 GGR pacing +0.5% YoY. Aug’s YoY development snapped June/July’s run of YoY declines. Aug 2022 had i to a lesser extent weekend solar day than finally year, although calendar shifts are neutral for Sept. We mold Sept GGR +1% YoY, which would place 3Q growing in-line with 2Q’s +0.5%,” noted Engel.

With a deluge of cassino companion earnings arriving inwards the coming weeks, some on Wall Street are constructive on the group, including Las Vegas-centric and regional operators. They fence that some of these stocks hold been unjustly repudiated this year.

Cautious on Penn

As the largest regional gambling casino operator, Penn Entertainment (NASDAQ: PENN) canful be seen as a bellwether for the group. But Engel urges caution on the name, noting in that location are “red flags” to consider.

“Heading into 2022, investors were conservative of young rivalry cannibalizing PENN’s market percentage in sure markets. 3Q demonstrated this, with meaningful GGR declines inward PA and Illinois,” said the analyst. “We’re also interested with William Penn Interactive’s 3Q EBITDA losses, as Penn invests inward ramping certain unexampled markets (Louisiana, Kansas, Ontario).”

The psychoanalyst also noted that even when ignoring the cash Penn is outlay on what appears to live an ill-fated adventure on California’s Proposition 27, an uptick in losses could amplify investors’ concerns regarding Penn’s power to grow profits inward its iGaming/sports wagering unit.

In to a greater extent encouraging news, Penn’s promotional disbursement has long been rational congenator to industry norms, and that precedent remains inward localise today. The society is also making investments in of import regions to bolster up market share.

Regional Casino Names to Consider

While Engel isn’t bullish on Penn, he highlighted some opportunities among regional gambling casino stocks, including Golden Entertainment (NASDAQ: GDEN). The companionship is inward the appendage of merchandising the Rocky Gap Casino Resort inward Flinstone, Md., which will wee-wee it an exclusively NV operator.

“We like the set-up for GDEN into 3Q results, where Southern Sagebrush State continues to live ace of the best-performing markets post-pandemic, with July/Aug GGR +25% vs 2019. As citywide events plectrum upwardly this shine and press mid-week hotel rates, we look GDEN’s Strat bookings to persist in regaining missed elbow room nights since COVID,” added the analyst.

Regarding Full House Resorts (NASDAQ: FLL), he says that story revolves largely around new venue openings inwards Colorado and Illinois. On Century Casinos (NASDAQ: CNTY), Engel notes that the operator’s third-quarter results could live pinched past currency headwinds due to its exposure to Canada and Poland.

He has “buy” ratings on Century, Full House, and Golden Entertainment spell grading Penn “neutral.”

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