Churchill Downs Readies 2-for-1 Share Split

Posted on: April 25, 2023, 05:05h. 

Last updated on: April 26, 2023, 03:33h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Churchill Downs (NASDAQ: CHDN) announced today it will split its stock on a 2-for-1 basis.

Churchill Downs stock split
Rich Strike pulls away from Epicenter in the final strides of the 2022 Kentucky Derby at Churchill Downs. Churchill Downs announced it’s splitting its stock. (Image: Coady Photography)

The transaction, which was approved by the gaming company’s board of directors, pertains to shareholders of record as of May 5. Those investors will receive one additional share of the stock for each share they own on that date.

The Company expects the additional shares to be distributed on May 19, 2023, and the stock to begin trading at the split-adjusted price starting on May 22, 2023,” according to a statement issued by the Kentucky-based firm.

Churchill Downs stock closed at $253.85 today, meaning that if the 2-for-1 split was implemented at that price, the post-split price would be $126.92. The company’s last year’s share split, also on a 2-for-1 basis, was implemented in April 1998, according to its investor relations website.

Speculating About Churchill Downs Stock Split

The operator of its namesake race track and the host of the Kentucky Derby, among other prestigious horse races, didn’t give a reason for the decision to split its stock.

Typically, companies with lofty share prices consider forward stock splits to make pricing more approachable to a broader swath of retail investors. It’s a strategy that’s been employed in recent years by the likes of Google parent Alphabet (NASDAQ: GOOG), Amazon (NASDAQ: AMZN) and Elon Musk’s Tesla (NASDAQ: TSLA), among others.

With today’s closing print of $253.85, Churchill Downs is the only stock in the gaming/wagering and leisure industry groups that trades with a triple-digit price — a status that will be maintained immediately following the split.

Share splits do not affect a company’s market capitalization. That means these transactions don’t alter the value of investors’ stakes in the company. For example, the value of owning 100 shares of Churchill Downs at $254 a share is the same as owning 200 shares at $127.

For its part, Churchill Downs has shown some commitment to shareholder rewards. In addition to the share split, the company announced a $500 million repurchase program in September 2021, and its annual dividend has grown by more than 40% since 2010.

Split Decision Comes Ahead of Earnings Release

Churchill Downs announced the stock split ahead of its first-quarter earnings update, scheduled for Wednesday after the close of US markets.

Analysts expect the racetrack operator will report earnings per share (EPS) of $1.81 on revenue of $536.57 million, implying year-over-year growth of 67.6% and 47.4%, respectively. Over the past 90 days, three analysts trimmed EPS forecasts on the firm while none raised those estimates. Four analysts lifted sales projections over that period.

Over the prior eight reporting cycles, Churchill Downs topped EPS estimates 50% of the time while beating revenue forecasts nearly two-thirds of the time.