Earnings Beat: Penn National Gaming, Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

By
Simply Wall St
Published
November 01, 2020
NasdaqGS:PENN
Source: Shutterstock

As you might know, Penn National Gaming, Inc. (NASDAQ:PENN) just kicked off its latest quarterly results with some very strong numbers. It was overall a positive result, with revenues beating expectations by 2.5% to hit US$1.1b. Penn National Gaming also reported a statutory profit of US$0.93, which was an impressive 76% above what the analysts had forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Penn National Gaming after the latest results.

View our latest analysis for Penn National Gaming

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NasdaqGS:PENN Earnings and Revenue Growth November 2nd 2020

After the latest results, the 14 analysts covering Penn National Gaming are now predicting revenues of US$4.97b in 2021. If met, this would reflect a sizeable 28% improvement in sales compared to the last 12 months. Penn National Gaming is also expected to turn profitable, with statutory earnings of US$1.48 per share. Before this earnings report, the analysts had been forecasting revenues of US$4.98b and earnings per share (EPS) of US$1.34 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

There's been no major changes to the consensus price target of US$75.46, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. 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. The most optimistic Penn National Gaming analyst has a price target of US$100.00 per share, while the most pessimistic values it at US$31.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Penn National Gaming's rate of growth is expected to accelerate meaningfully, with the forecast 28% revenue growth noticeably faster than its historical growth of 12%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 22% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Penn National Gaming is expected to grow much faster than its industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Penn National Gaming following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Penn National Gaming. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Penn National Gaming going out to 2024, and you can see them free on our platform here..

However, before you get too enthused, we've discovered 3 warning signs for Penn National Gaming that you should be aware of.

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