By Jeremy C. Owens
The struggles of one of the newest members of the S&P 500 index continued Thursday, despite stronger-than-expected earnings results.
Penn National Gaming Inc. /zigman2/quotes/209264611/composite PENN -0.89% shares dropped more than 10% in Thursday trading after the gambling company reported earnings that more than doubled expectations. Penn reported first-quarter profit of $91 million, or 55 cents a share, improving from a loss of $5.26 a share in the same quarter a year ago, which was mostly due to an impairment charge of more than $600 million related to the COVID-19 pandemic.
Penn reported net revenue of $1.28 billion, up from $1.12 billion in the year-ago quarter. Analysts on average expected earnings of 26 cents a share on sales of $1.14 billion.
Shares dove in Thursday’s trading session despite the earnings beat, with Penn suffering the second-weakest day of any S&P 500 stock behind only Etsy Inc.’s /zigman2/quotes/202790087/composite ETSY -3.40% post-earnings selloff. Jefferies analysts had expected “a neutral to modestly positive reaction in the shares” after the numbers hit, but said that a slower rollout of online gambling options could temper enthusiasm.
“The upside in the quarter … should be expected given the regional strength previously indicated by peers, but is positive nonetheless,” the analysts wrote ahead of Thursday morning’s conference call. “Separately, the ongoing transformation to a technology-driven enterprise continues to progress, albeit more gradually than some peers, [which] could temper the Street’s bullishness in response.”
Executives did not appear to provide any reason for pessimism in the call, with Chief Executive Jay Snowden calling out improving metrics into the current quarter. The company did not provide any official guidance for the current quarter nor year due to pandemic uncertainty.
“Our performance in March and April … reflects the additional easing of restrictions and an increase in the percentage of people vaccinated. Revenues were 8% over the same two-month period in 2019, while adjusted Ebitdar accelerated 29% to $410 million and Ebitdar margins increased 650 basis points to nearly 40%,” Snowden said. “We also note that spend-per-visit is much higher than it was pre-COVID.”
Penn has seen its stock rise more than 400% in the past year amid further legalization of sports betting and its investment in popular sports website Barstool . Penn is using Barstool’s branding on its sports-gambling platform, which competes with Caesars Entertainment Inc. /zigman2/quotes/205281174/composite CZR +2.50% , MGM Resorts Intl. /zigman2/quotes/209932643/composite MGM -1.72% , Flutter Entertainment PLC /zigman2/quotes/206709455/delayed IE:FLTR +1.58% , DraftKings /zigman2/quotes/213120645/composite DKNG -2.33% and others to service bettors as U.S. states legalize sports gambling.
The gains have settled since Penn was added to the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.32% in March. Penn shares have declined more than 36% in the past three months, bringing its market capitalization down to about $14 billion as of Thursday trading from a peak of roughly $18 billion earlier this year.
DraftKings, which is scheduled to report earnings Friday morning, has also seen shares pull back in recent weeks, falling more than 18% in the past three months and declining more than 10% as well in Thursday trading. Caesars experienced strong gains after its own earnings report earlier this week showed large losses continuing, and is up more than 21% in the past three months.