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Penn National Gaming Earnings: What to Watch

By Parkev Tatevosian, CFA – Oct 16, 2021 at 9:30AM

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The gaming company is set to report third-quarter earnings on Oct. 27.

Penn National Gaming (PENN 0.88%) owns and operates land-based casinos, and it's getting into the mobile gaming industry as of late. The company is seeing more customers visit its casinos as economies are reopening. 

In this segment from Beat & Raise, recorded on Oct. 4, contributors Brian Withers and Parkev Tatevosian discuss a few things investors should look for when the company reports third-quarter earnings on Oct. 27. 


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Parkev Tatevosian: Penn National Gaming. For those who are not aware, Penn National Gaming runs a regional land-based casinos and recently, they've been entering into the mobile sports book place. Analyst expectations for Q3 revenue is for 1.5 billion, which is 33 percent growth from last year. But there is an asterisk in that growth which I can get into later, if you want me to, Brian. Then earnings-per-share is expected to decline a little bit at 88 cents per share. Some things to watch when Penn reports is firstly, any discussion on entry into new states for mobile sportsbook and iGaming. Right now, Penn National Gaming is live in about nine states for mobile sportsbook. Management has said that they plan on being live in 10 states by the end of the year. When they report, it will be interesting to listen if that guidance is updated. Do they expect more or do they expect to stay at the level of nine for now? That's something to keep an eye on there. Secondly, you'll want to pay attention to how the company's casinos, the land-based casinos are evolving as reopening trends continue to be in their favor. In particular, during the summer and late summer, we had the Delta surge, so you'll want to see how that impacted revenues and customer visitation and all of that for Penn National Gaming. Did it slow down customer enthusiasm and has that returned if it did slowed down? You'll want to hear management discussed some of that. Then finally, on August 5th, Penn National Gaming announced that they were acquiring the score, which is a sports media and mobile sportsbook operation in the United States and in Canada. The acquisition first for two billion dollars, half in cash and half in stock. You want to hear how the progress on that is going. Interestingly, the score, I was surprised to find out, is more popular in Canada than the ESPN app is. They're number 1 in Canada and they're number 3 here in the states, but number 1 in Canada, ahead of ESPN.

Brian Withers: That's really cool. I'm wondering, Penn National Gaming, is most of their revenue from their physical brick-and-mortar locations or is sportsbook stuff, I would hope it's becoming more and more of the trend. Do you know the split out?

Parkev Tatevosian: Yes. The land-based casinos are a significant majority of their revenues right now, although the mobile sportsbook is the segment that contains the mobile sportsbook and iGaming is increasing much faster. The land-based casinos are substantially more than the mobile sportsbook for now.

Brian Withers: Cool. A classic gaming company trying to get into the online scene, which makes sense to me, I guess if the mobile sportsbook was having some positive momentum early in the year, you look at the stock price, it just shoots up. Then we've seen a decline here. I imagine reopening, timing, and Delta variant may have affected the sentiment here. What's your perspective?

Parkev Tatevosian: Absolutely. It looks like the market was more excited about Penn's growth in mobile sportsbook and iGaming. To that end, the reopening trend hurts that side of the business more. Even though its land-based casinos are benefiting from reopening, its mobile sportsbook in iGaming growth is taking a little bit of a hit because of that. That's where I believe you see the price dropping as the reopening trends accelerated. The market was hoping, I guess, a little more time for them to develop that mobile sportsbook.

Brian Withers: Or just that the mobile sportsbook was more incremental demand versus just an offset to their land-based casinos. It will be interesting. I imagine they'll provide a little more color on that in the upcoming quarter as well.

Parkev Tatevosian: An interesting development could be recently New York state legalized mobile sports betting. The request for proposal is the share of revenue that New York wants of gaming revenue in taxes is actually really expensive compared to other states. It will be interesting to hear management if they are planning on applying in that market or not because of how expensive it could be.

Brian Withers: That's interesting. But that's a massive market though. It may be hard to pass up.

Parkev Tatevosian: The projections were for a billion in gross gaming revenue. New York is requesting 50 percent in taxes, [laughs] so it's potentially 500 million in gross gaming revenue split.

Brian Withers: That's interesting. Very much a rush, I guess a gold rush there for these companies to get online.

Parkev Tatevosian has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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