Penn National Gaming Lifts Q2 Guidance, Plans $400M Debt Sale

Posted on: June 24, 2021, 08:24h. 

Last updated on: June 24, 2021, 06:13h.

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

Penn National Gaming (NASDAQ:PENN) stock is getting a much needed boost Thursday. It is trading higher after the regional gaming company raised second-quarter revenue and adjusted earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) forecasts.

penn guidance
Barstool Sports founder David Portnoy, pictured above. Penn National stock is rallying on positive second-quarter guidance. (Image: CNN)

The operator of 41 casinos across 19 states said it expects sales for the quarter ending June 30 to be $1.45 billion to $1.55 billion on EBITDAR of $540 million to $580 million. Analysts were expecting revenue of $1.36 billion. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the March through June period is estimated to be $420 million to $460 million.

Margin expansion, a frequently cited catalyst for regional gaming equities, is contributing to Penn’s upbeat second-quarter outlook.

The midpoint of our expected revenue and Adjusted EBITDAR ranges reflect a quarterly sequential improvement of 18 percent and 25 percent, respectively, and Adjusted EBITDAR margin improvement of 220 basis points,” said the company in a statement. “When compared to the three months ended June 30, 2019, we expect revenue, Adjusted EBITDAR, and Adjusted EBITDAR margin to increase by 10 percent, 32 percent, and 625 basis points, respectively.”

Penn beating 2019 figures is relevant because 2020 numbers aren’t viewed as good comparisons, given the pandemic shutdowns.

Some Relief for Penn Stock

The bullish outlook is providing some relief for Penn stock. The shares are higher by 2.43 percent in early trading, a welcome sign for a name that’s shed 26.2 percent over the past 90 days.

Previously one of the high-fly acts among gaming equities, Penn is down 11 percent year-to-date, resides 44.6 percent below its all-time high. It hasn’t closed above $100 in over two months. Wall Street is divided on the name. Still, there are obvious positives here, namely the operator’s ability to drive sustained margin expansion at its brick-and-mortar casinos.

“We believe this year-over-year and sequential improvement not only highlights continued strong demand trends but also underscores our ability to drive sustainable margin improvement,” said Penn in the statement.

Debt Sale

The Pennsylvania-based gaming company also said it’s selling $400 million worth of eight-year senior unsecured notes in a private offering. Penn doesn’t identify a buyer, but appetite is likely there for the debt. That’s because, given the maturity and the issuer’s junk credit rating, these bonds will carry a high yield. Moody’s rates the offering B3.

The operator said it plans “to use proceeds of the proposed offering for general corporate purposes.” This is a standard corporate line regarding bond sales. However, there’s speculation on social media that the company will use the capital to fund the expansion of its iGaming and online sports betting units.

Penn’s Barstool Sportsbook is live in Illinois, Indiana, Michigan, and Pennsylvania, with Virginia likely to soon join that list. Colorado, Iowa, New Jersey, Tennessee, and West Virginia are probable launch destinations for the mobile sports betting app as 2021 moves along, with Arizona, Louisiana, and Maryland being possibilities as well.