The addition last fall of 12 properties from Pinnacle Entertainment, coupled with January’s purchase of a Louisiana casino, helped regional operator Penn National Gaming grow revenues by $466.5 million in the first quarter.
However, net income declined slightly due to one-time expenses related to implementing the company’s new customer loyalty program.
Still, the investment community viewed Penn’s earnings for the quarter that ended March 31 in a positive light. Weather issues in many of the markets where Penn operates didn’t hurt the company’s overall results.
Penn, which currently operates 41 gaming properties in 18 states, said revenues were up 36 percent to $1.28 billion in the quarter. Meanwhile, net income was $41 million, or 35 cents per share, compared with $45.4 million, or 48 cents per share, in the same quarter a year ago.
Before lease payments, Penn’s cash flow increased almost 60 percent to $391.4 million.
“The company’s first quarter operating results were far better than expected given the weather complications encountered in several markets during the quarter,” Stifel analyst Steven Wieczynski told investors.
Penn National CEO Tim Wilmott presented Wall Street with an upbeat comment, saying the cost savings from the $2.8 billion Pinnacle deal would result in $115 million in overall cost savings, $15 million more than the company previously anticipated. As of the end of March, cost savings from the transaction totaled $40 million.
“We remain highly focused on driving revenue synergies, which will start with our combined player loyalty program,” Wilmott said. “We expect to have all of our properties on the single platform by the end of July.”
Penn is also continuing to add properties. The company expects to complete the acquisition of operations of Detroit’s Greektown Casino by the end May. Penn is paying $300 million for the operations, and real estate investment trust VICI Properties is buying the building and land for $700 million.
Michigan will become the 19th state where Penn operates a casino.
The company also plans to spend $120 million on the Hollywood Casino York and $111 million on the Hollywood Casino Morgantown, two of the “mini-casinos” in Pennsylvania that were authorized by state lawmakers in 2017. Wilmott said the construction timeline for the casinos is between 12 to 18 months following all approvals and final licensing by the Pennsylvania Gaming Control Board.
“Digestion of the prior acquisitions and forthcoming Greektown acquisition should position Penn for growth, with execution being the determining factor for the (stock price),” Jefferies gaming analyst David Katz told investors.
Shares of Penn National closed at $20.04 in trading on the Nasdaq Thursday, down $1 or 4.75 percent.
Wieczynski blamed the drop in Penn’s stock price on weakness in the broader stock markets.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
