“Our performance in the fourth quarter and full year clearly underpins the effectiveness of Monarch’s operating strategies and our ability to drive sustained growth.” So said an unnamed Monarch Casino Resorts executive in the course of announcing the company’s fourth-quarter results.
Monarch reported a series of positive financial metrics. Revenue rose 4.9 percent to $134.5 million. Profits were $25.5 million, a 40.1 percent upshot. And cash flow widened 9.9 percent to $47.3 million.
The only negative was a 0.7 percent slippage in food and beverage receipts. Hotel revenues were up 8.3 percent and gambling winnings grew six percent. The F&B shortfall was blamed on inflation.
“Monarch Black Hawk continues to grow market share and increase revenue across all its business segments,” the company said of its Colorado megaresort. In Reno, Monarch said it was putting the finishing touches on a $100 million redesign of its Atlantis flagship, with 246 hotel rooms remaining to be done.
The company said it was looking at merger-and-acquisition opportunities. It added, “Monarch’s strong balance sheet and free cash flow favorably positions the company to continue investing in its properties and paying cash dividends.”
As of year’s end, Monarch reported $58.8 million cash on hand and no debt. Atlantis improvements were described as being funded out of cash flow, as was a Dec. 1 dividend of 30 cents per share.
Citing an “absence of growth catalysts” at Monarch, Jefferies Equity Research analyst David Katz called his outlook “measured.” Even so, he credited the Black Hawk resort with increasing market share. He further opined that roughly five percent growth at Atlantis was possible, as its renovations would lead to improved room rates and more traffic on the casino floor.
Despite a maintained Hold rating on MCRI shares, Katz upped his price target from $88 to $90 per share. Monarch shares were trading at $85.81 apiece at the time.
Truist Securities analyst Barry Jonas was more enthusiastic, reiterating a Buy rating on Monarch. He observed that not only did the company gain market share in Black Hawk, but the Reno commentary was upbeat, even with renovations not finishing until spring of this year.
Jonas wrote, “The consumer feels healthy, while costs are being contained — potentially positive for the wider regional group.” He also cited the high quality of Monarch’s assets (“best in class”) as a cause for optimism. He moved his price target from $100 a share to $105.
Monarch’s fourth-quarter revenue exceeded Wall Street’s consensus projection of $128.5 million (Katz’s number was an even-lower $123.2 million). Cash flow also came out far ahead of analyst consensus ($41.9 million) and further still of Katz’s $40.2 million.
Jonas noted that Monarch’s cash flow was 10 percent better than Wall Street anticipated and its profits five percent wider. He added that the company’s spa and retail divisions were 13 percent higher in the fourth quarter.
Other Jonas disclosures were that average nightly room rates at Atlantis will go to $125 per day post-remodeling and that a new marketing campaign is on the way. He observed that, despite the projected revenue growth, Monarch is “continuing to reduce costs at the property, given competition in the market remains fierce, with management looking to implement new technology and processes, which it believes will be rewarding” over the long haul.
“The continued upside to our expectations is driven by the company gaining market share in Black Hawk and its market leading resort in this underpenetrated market,” explained Katz. He added that the room improvements in Reno would drive rates upwards as much as 25 percent.
Katz concluded, “We are increasing our Black Hawk estimates and building in trajectory for the renovated rooms in Atlantis.” His 2025 revenue projection rose from $522.6 million to $536.3 million. He also adjusted his cash flow forecast from $176.8 million to $184.9 million.
Jonas finished by pointing out that Monarch was still awaiting a verdict in its lawsuit against its Black Hawk general contract. Monarch “could possibly see a windfall if it wins, although the range of outcomes remains uncertain.”
