Quarterly earnings reports so far have been positive, according to Jefferies Equity Research analyst David Katz in a July 27 investor note. The common theme has been, he said, operator introspection “whether it be to improve execution or to review future direction.”
Continued Katz, “We are particularly bullish on management teams that can concede publicly that it can do better and articulate how,” specifically Las Vegas Sands Corp. and Churchill Downs Inc. Those companies’ earnings calls were characterized by bullishness towards the future and how they would address it. Boyd Gaming Corp. and Gaming & Leisure Properties Inc. (GLPI) were said to be different, “in that they bear no pressure to change course.”
Katz kept “Buy” ratings on all four companies’ stocks. He moved his price target for Sands from $58 per share to $61, and that for Churchill Downs from $127 to $131. Those companies’ shares closed Monday at $52.49 and $111.25, respectively.
“The overall take from the quarter so far is that companies are benefiting from solid to strong demand trends in Macau, Singapore and regional markets,” Katz chronicled. For instance, Sands was reporting strong momentum in its Singaporean construction projects, which it believed would yield higher room rates.
In Macau, Sands experienced a brisker performance at its The Londoner. Management expressed dissatisfaction with its Macanese performance and “spoke to enhancing customer reinvestment strategies that began in April this year.” Katz expected (and was not bothered by) some deterioration in Macanese margins in return for improved gross gaming revenue.
Churchill Downs outperformed Wall Street’s estimates, delivering second-quarter revenue of $934.4 million and cash flow of $450.9 million. Analysts had expected only $895 million in revenue and $430.6 million in cash flow.
Particularly strong were both Churchill Downs’ live-racing offerings in Kentucky and Virginia, as well as its historical horse racing machines in those states. In addition, management plans to repurchase $500 million in CHDN shares.
The company also looked for across-the-board gains at the 2026 Kentucky Derby. More money, it felt, could be extracted from ticket prices, broadcast rights, betting, sponsorships and upgrades to the Louisville facilities.
All of these factors satisfied Katz’s top-line concerns for this year. His one question mark involved the purchase of a casino in Salem, New Hampshire, and what its future earnings potential might be.
“Singles and doubles while looking for the right pitch,” was Katz’s characterization of Boyd. The company exceeded his revenue projection by $85 million, delivering slightly over $1 billion, along with cash flow of $357.9 million in cash flow. (Katz had expected $329.2 million.)
“The growth was supported by core customers as well as improvements in retail play,” Katz explained, it also appeared that the proceeds of the sale of Boyd’s five percent FanDuel stake would be plowed into stock repurchases. $500 million was committed to that end, to be achieved in four quarters rather than at a previous $100 million-per-month clip.
Katz opined that this was consistent with Boyd policy, even if Wall Street wanted more merger-and-acquisition activity instead. “That said, we don’t fortell compelling acquisition targets currently and appreciate the firm’s focus on investing internally and returning capital to shareholders for the time being,” the analyst added.
By contrast, GLPI very slightly undershot its earnings and cash-flow projections. “More important than the print is that the company discussed its growth avenues going forward, which are largely focused on expansions with existing tenants and loan opportunities in Native America,” said Katz, who opined that more tribal deals were imminent.
