Shareholders of Penn National Gaming, Inc. (NASDAQ:PENN) will be pleased this week, given that the stock price is up 15% to US$34.32 following its latest yearly results. Statutory earnings per share fell badly short of expectations, coming in at US$0.37, some 76% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at US$5.3b. Earnings are an important time for investors, as they can track a company’s performance, look at what top analysts are forecasting for next year, and see if there’s been a change in sentiment towards the company. We thought readers would find it interesting to see analysts’ latest (statutory) post-earnings forecasts for next year.
View our latest analysis for Penn National Gaming
After the latest results, the twelve analysts covering Penn National Gaming are now predicting revenues of US$5.51b in 2020. If met, this would reflect a credible 4.0% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to soar 496% to US$2.26. Before this earnings report, analysts had been forecasting revenues of US$5.52b and earnings per share (EPS) of US$2.07 in 2020. So the consensus seems to have become somewhat more optimistic on Penn National Gaming’s earnings potential following these results.
The consensus price target rose 25% to US$38.23, suggesting that higher earnings estimates flow through to the stock’s valuation as well. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. There are some variant perceptions on Penn National Gaming, with the most bullish analyst valuing it at US$42.00 and the most bearish at US$32.00 per share. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It’s pretty clear that analysts expect Penn National Gaming’s revenue growth will slow down substantially, with revenues next year expected to grow 4.0%, compared to a historical growth rate of 13% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 7.5% per year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Penn National Gaming to grow slower than the wider market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around Penn National Gaming’s earnings potential next year. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have forecasts for Penn National Gaming going out to 2023, and you can see them free on our platform here.
You can also see whether Penn National Gaming is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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