Churchill Downs Posts Record Q1 Revenue, Analyst Bullish on Virginia Properties

Posted on: April 25, 2024, 12:23h. 

Last updated on: April 25, 2024, 10:13h.

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

Shares of Churchill Downs (NASDAQ: CHDN) jumped 3.74% in after-hours trading Wednesday after the gaming company reported record first-quarter sales and earnings that topped Wall Street estimates.

Churchill Downs Terre Haute Indiana
Churchill Downs’ new Terre Haute Casino Resort. New venues are boosting the company’s results. (Image: Tribune-Star)

The operator of the famed Kentucky racetrack of the same name said it earned $1.08 a share on revenue of $590.9 million in the first three months of the year. Analysts expected earnings of 76 cents on sales of $564 million. Churchill’s Kentucky historical horse racing segment drove a topline increase in that unit of $33.1 million to $248.9 million. Stifel analyst Jeffrey Stantial highlighted strength at the operator’s Virginia properties, including historical racing machine (HRM) venues.

Compositionally, we argue results evidence our select list thesis, in particular highlighting 1) meaningful sequential acceleration for CHDN’s VA HRM properties (mid-December skill game ban; improving HRM product), and 2) resilient operating trends at Rivers,” wrote the analyst.

Stantial has a “buy” rating and $150 price target on Churchill — forecasts that are under review pending the company’s conference call with analysts on Thursday morning.

Live, Historical Racing, TwinSpires Boost Churchill Q1 Results

Churchill Downs’ strong first-quarter results were supported by encouraging outcomes from the operator’s historical and live horse racing segments, as well as from the TwinSpires online betting unit.

In the January through March period, Churchill’s historical and live horse racing revenue jumped 15% as earnings before interest, taxes, depreciation, and amortization surged 23%. The gaming company said those metrics at TwinSpires increased 18% and 35%, respectively, year over year.

Those gains come ahead of the Kentucky Derby, which is scheduled for Saturday, May 4. The 150th edition of the crown jewel in horse racing’s triple crown could be another record-setter for Churchill this year as the operator has made significant investments, including a new paddock and more seating, at its eponymous Kentucky track to expand capacity and lure more affluent bettors.

Stantial pointed out that HRM properties in Virginia showed the most year-over-year growth, underscoring benefits for Churchill Downs, which is the largest gaming operator in that state.

Speaking of Virginia …

Be it by way of HRM venues or traditional gaming properties, Virginia figures prominently in the long-term Churchill Downs investment thesis.

Monthly data reported by VRC shows meaningful sequential improvement in Y/Y growth across most of CHDN’s VA assets, likely reflecting a combination of 1) annualization of new supply headwinds, 2) mid-December implementation of a ban on competitive skill games, 3) improving HRM product & layout at CHDN facilities, and 4) broader ramp at relatively new properties,” noted Stantial.

The analyst also observed that Churchill’s recently opened casino hotel in Terre Haute, Ind. is off to a strong start, and that venue is likely to be discussed in greater detail on the conference call.