Penn National Optimistic Despite Sketchy Q2 Earnings Numbers

Penn National Gaming is the latest top tier gambling provider to report huge and inevitable COVID-led losses in Q2. But the company, like others in their space has seen signs that things are in the process of turning around. Months of shuttered retail operations and a global shutdown of marketable sports action was bound to have an effect on the legal betting business and the numbers from the period that ended June 30th reflect just that.

Through it all, Jay Snowden, President and CEO, put a positive spin on the state of the company, saying: “While the last several months have presented unprecedented challenges for our company, I am extremely proud of the way our corporate and property leaders and valued team members have risen to the occasion and, working tirelessly alongside our regulators and public health officials, have successfully reopened all but two of our casino properties as of today (Zia Park and Tropicana Las Vegas)."

The Figures

Penn National's revenues in Q2 hit $305.5 million, a whopping $1 billion less than was reported over the same period in 2019 when the company made $1.3 billion. Net losses for Q2 of this year were equally troubling, coming in at $214.4 million, compared to earnings of $51.4 million in Q2 of 2019.

Adjusted Earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) was $24.5 million compared to $406.5 million year-on-year - roughly one-tenth what it was last year over the same period. Revenue at reopened properties from the applicable date of reopening through June 30 fell 6% Year-on-Year, while adjusted property EBITDAR at reopened properties increased 33%.

"While May and June results may have benefited in part from pent-up demand, we continue to be highly encouraged by revenue and EBITDAR trends in July and early August, despite the continuation of safety protocols, including capacity restrictions and social distancing mandates," notes CEO Jay Snowden.

While the losses appear to be part of a "doom and gloom scenario", Penn National beat Zacks Consensus Estimate forecasts on many levels. The disappointing $305.5 million in revenues were actually 31.31% above Zacks Consensus Estimate of $249.1 million in revenues for the period ending June 31.

Surprising Stock Surge

Beating consensus forecasts has led to a surprising stock surge for Penn National. The stock did fall $1.69 per share during the second quarter but came in at a much better than the forecasted $2.06 per share loss predicted by Zacks Investment Research. Q2 of 2019 saw Penn National stock jump $0.44 – during a time of zero disruption in the international gaming industry.

As of Thursday afternoon, Penn National stock was trading at $43, which translates to an immediate 12% increase on the news of the company weathering the COVID-19 storm and ultimately eclipsing Q2 forecasts. Good news translates to stock increases and minimal losses during the COVID lockdowns has been deemed good news by company execs and investors.

Penn National Moving Forward

Penn National Gaming operates 41 properties across 19 states - all but two have opened for the time being. With an eye on new technologies and with Penn National ready to cash in on Barstool Sports incredibly popular stable of sports betting stories, videos, and TV shows and their 66 million dedicated viewers, the arrow is pointing way up on Penn National moving forward.

“Our goal is to come out of this pandemic as a stronger company, and we believe the operational changes we have implemented, together with our strengthened balance sheet and unique omni-channel strategy supercharged by Barstool Sports, position us to achieve this goal and drive enhanced shareholder returns,” said Jay Snowden.

The company boasts an incredibly diverse portfolio and a hugely wide reach in what is considered one of the most appealing sports betting markets in the world. Through it all, Penn National looks poised to make good on their goal of maintaining their powerhouse status in the US legal betting scene.