The record number of casino acquisitions tell the real story about Penn National Gaming, not its quarterly results, according to Jeffries gaming analyst David Katz. Others consider Penn a great buying opportunity.
Katz noted that Penn added more than one dozen casino resorts to its portfolio in the quarter that just ended and will soon acquire Pinnacle Entertainment as well as finalizing its $115 million purchase of Margaritaville Resort Casino in Louisiana in December.
Seeking Alpha interviewed Katz who said, “We view the slightly lower than expected results as less consequential than the recently closed acquisition of Pinnacle,” said Jefferies gaming analyst David Katz. He acknowledged Penn’s projections of producing more than $1 billion of cash flow this year.
Penn is also moving forward with a proposal to build to casinos in its home state.
Deutsche Bank gaming analyst Carlo Santarelli added that Penn would create a short-term buying opportunity for stock investors but was also solid as a long-term purchase.
The company’s net revenue declined 2.1 percent to $789.7 million in the last quarter, but the company expects a dramatic reversal next quarter with an expected $1.5 billion profit by the end of the year.
The company’s two Nevada properties, Tropicana Las Vegas and M Resort in Henderson made up for other issues elsewhere Penn CEO Tim Wilmott said during his prepared statement when he discussed plans for future growth. The merger with Pinnacle will give a boost to Penn’s cash flow, he said.
“With the expected significant free cash flow to be generated from our expanded base of operations, we are well-positioned to embark on an active leverage reduction program while pursuing accretive strategic growth investments, as well as evaluating opportunistic returns of capital to shareholders,” he said.
