Key Highlights

  • PENN Entertainment shares are trading up 7.52% at $17.09, against a previous close of $15.89.
  • Ohio regulators reported September casino Revenue up 12.6%, with PENN's Hollywood Columbus up 20.1% to $26.5 million.
  • The company reports third-quarter results before the market opens on Nov. 5.
  • Consensus calls for about $1.84 billion in revenue, up roughly 6.6% to 7.2% year over year.
  • Full-year retail adjusted EBITDA midpoint was raised to about $1.963 billion.

PENN Entertainment (NASDAQ:PENN) shares are rallying into the company's third-quarter report, due before the market opens on Nov. 5. Wyomissing, Pennsylvania-based PENN is one of North America's largest regional gaming operators, running about 42 to 44 casinos and racetracks across roughly 19 to 20 U.S. states. Volume is below average, and the move far outpaces the sector's gains.

Ohio Revenue Data Supports New-Property Investments

Ohio regulators reported September casino revenue up 12.6%, and PENN's Hollywood Columbus rose 20.1% to $26.5 million, which supports the case that its new-property investments are working. Churchill Downs (NASDAQ:CHDN) also reported strong results, and the session is risk-on, with oil sharply lower and consumer discretionary stocks leading.

Third-Quarter Report Setup

Consensus calls for revenue of roughly $1.84 billion, up about 6.6% to 7.2% from a year earlier, with EPS estimates ranging from $0.17 to $0.23 depending on the source. In the second quarter, PENN reported EPS of $0.44 against a $0.37 consensus and revenue of $1.86 billion, up 5.2%.

Options markets imply a move of about 9.14% after the report, while the historical average post-earnings move is about 11.65%.

Interactive Losses and Retail Strength in Focus

Management said the third quarter would carry the heaviest interactive loss of the year, including about $20 million of Investment behind the July 13 Alberta launch. Full-year online revenue guidance was trimmed to $1.57 billion, and the EBITDA loss guide was held at $20 million. The Interactive segment, which includes theScore Bet and Hollywood Casino iCasino, has been refocused on Canada and U.S. iCasino after the end of the ESPN BET partnership.

Retail adjusted EBITDA in the second quarter was $517.2 million, up 6%, and the full-year retail midpoint was raised to about $1.963 billion. Management expects about 50 basis points of year-over-year Margin improvement in the back half. Other topics include competition from prediction markets and rival operators heading into football season, higher gaming taxes and new retail projects such as the Aurora development funded by Gaming and Leisure Properties (NASDAQ:GLPI).

Analyst Targets and Valuation Markers

Consensus is Moderate Buy with a $23.61 target, though Morgan Stanley and Wells Fargo recently cut their targets. The stock trades at 10.33 times forward Earnings with trailing EPS of negative $6.35 and a market Capitalization of about $2.29 billion. Its 52-week range runs from $11.65 to $22.36.

Interactive Profitability Target and Retail Margins to Track

Investors will look for whether the fourth-quarter interactive profitability target is reaffirmed, how retail margins compare with the guided improvement and whether full-year online revenue and EBITDA loss guidance holds after the Nov. 5 report.