The regional gaming business wasn't quite as strong as investors had hoped at Penn National (Nasdaq: PENN). Revenue did grow 7.3% in the fourth quarter to $676.5 million, and adjusted EBITDA rose 17.8% to $156.6 million in the quarter. But analysts expected earnings per share of $0.49, and the company only delivered $0.41 in diluted earnings per share, $0.48 if you take out items not included in its guidance.
Much of the revenue growth can be attributed to the M Resort in Las Vegas, which the company began consolidating last year. The East/West regions, which include the M Resort, grew revenues 19.7% from a year ago while the other market segments struggled. The Midwest had revenues fall 1.7% and the Southern Plains revenue fell 3.6%. That doesn't bode well for Ameristar Casinos (Nasdaq: ASCA), which gets much of its revenue from the Midwest part of the country. But it may be positive for Boyd Gaming (NYSE: BYD), which gets most of its revenue from Las Vegas and the East Coast.
The Southern Plains region should get a boost once the Hollywood Casino at Kansas Speedway is open. The speedway hosts two Nascar Sprint Cup races each year and many other events. Construction is also due to be completed in 2012 on casinos in Toledo and Columbus.
Slow and steady regional gaming
At this point, any growth in revenue or profitability is a positive for regional gaming companies. The proliferation of gaming across the country has made the business much more competitive for each gaming dollar. Now even Wynn Resorts (Nasdaq: WYNN) is looking to expand into the Boston area, further expanding the reach of the major operators. MGM Resorts (NYSE: MGM) and Caesars already operate casinos across the country, and more competition for megaresorts would hurt everyone else.
That's what's been so impressive about Penn National: the solidly profitable base the company has been able to build amid the competition.
A look forward
Penn National is expecting revenue to increase slightly in 2012 to $2.8 billion, and earnings per share of $2.22, down slightly from $2.26 in 2011. An improved economy should help the company in 2012, but competition will be its downfall as more casinos battle for gamblers' dollars next year.
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