Chicago Project And Pipeline Initiatives Will Unlock New Horizons

Key Takeaways

• Strategic acquisitions and developments are set to drive future revenue growth as projects become operational and integrated.
  
• Healthy leverage and financing strategies strengthen the company's ability to pursue growth opportunities and enhance earnings despite economic uncertainties.
  
• Delays and challenges in key projects, rising expenses, and volatility in financing costs pose significant risks to revenue growth and net margins.

Catalysts

GLPI is engaged in the business of acquiring, financing, and owning real estate property to be leased to gaming operators in triple-net lease arrangements, pursuant to which the tenant is responsible for all facility maintenance, insurance required in connection with the leased properties and the business conducted on the leased properties, taxes levied on or with respect to the leased properties and all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties.

• Upcoming projects, like the Chicago development, are expected to drive future revenue, with ongoing construction and long-term commitment to the project providing future growth opportunities. This could positively impact revenue as the project progresses and reaches completion.
  
• The company's strategic acquisitions, such as the Bally's Chicago land deal, have already shown a positive impact on cash income, with further potential to drive revenue growth as these assets become fully operational and integrated.
  
• Adjustments like financing and lease escalations have contributed to income growth, suggesting the potential for increased revenue and earnings through these mechanisms in future periods.
  
• The company's focus on developing a pipeline of opportunities and strategic tenant partnerships might create avenues for long-term revenue stability and competitive advantage, helping to bolster net margins and earnings.
  
• Healthy leverage and strategic capital funding initiatives put the company in a strong position to seize growth opportunities and potentially enhance earnings per share, even amid macroeconomic uncertainties.

Gaming and Leisure Properties Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Gaming and Leisure Properties's revenue will grow by 4.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 50.0% today to 53.9% in 3 years time.
• Analysts expect earnings to reach $940.9 million (and earnings per share of $3.11) by about May 2028, up from $774.8 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $1.1 billion in earnings, and the most bearish expecting $632.7 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 21.2x on those 2028 earnings, up from 16.5x today. This future PE is lower than the current PE for the US Specialized REITs industry at 29.5x.
• Analysts expect the number of shares outstanding to grow by 1.23% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.32%, as per the Simply Wall St company report.

Gaming and Leisure Properties Future Earnings Per Share Growth

Risks

• The complexity and delays in the Chicago project, including environmental problems and required city approvals, could lead to increased costs and timelines, potentially impacting future revenue from this development.
  
• Increased operating expenses due to noncash adjustments and a more pessimistic economic forecast might affect net margins if these expenses continue to rise.
  
• The assumption that escalation on the Pinnacle lease will not be achieved, contributing to a reduction in high-end guidance, implies potential lower revenue growth than anticipated.
  
• Volatility in variable rate debt, which constitutes over $930 million of borrowings, poses a risk to net margins as rising interest rates could increase financing costs.
  
• The cautious outlook on iGaming expansion suggests potential cannibalization risks for brick-and-mortar revenues, potentially affecting earnings if not adequately mitigated by tenant guarantees and market conditions.

Valuation

• The analysts have a consensus price target of $55.196 for Gaming and Leisure Properties based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $60.0, and the most bearish reporting a price target of just $48.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.7 billion, earnings will come to $940.9 million, and it would be trading on a PE ratio of 21.2x, assuming you use a discount rate of 7.3%.
• Given the current share price of $46.52, the analyst price target of $55.2 is 15.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.