It’s early in the first-quarter earnings report season with only three gaming operators having reported, but there may already be a theme: caution.
In my last column, I suggested this will be an important earnings season for what companies say about operating in an environment where the president’s policies change minute to minute, leading to both worries about a recession and uncertainty about how to—or even whether to—invest in growth.
I suggested that the sell-side analysts press management on conference calls to justify and explain and not give glib responses to important questions about how their companies are faring and what they are doing during this uncertainty.
Well, it appears the companies are doing more than talking. They are acting.
So far, all three of the reporting operators are taking very conservative actions:
- Las Vegas Sands (LVS) is ending its pursuit of a $4 billion casino near New York City. And, while the company blames uncertainty over whether New York will legalize iGaming, it would not be surprising if other factors enter in to the decision, like dealing with a selection process that seems to give considerable influence to community casino opponents and the state’s unclear direction in how it will proceed with picking a licensee.
Whatever the reasons, LVS is nixing a big capital project in the U.S. while it continues to invest in Singapore and remains committed to Macau.
- Churchill Downs (CHDN) is deferring a $900 million expansion at its flagship and namesake racetrack, while moving ahead with a $30 million project set to open by next year’s Kentucky Derby.
CEO Bill Carstanjen minced no words in giving his reasons for the pause. “A lot has changed in the world in the last nine weeks,” he said, citing the uncertainty of government policies, including tariffs, which affect costs of construction supplies. CHDN will carefully evaluate factors as it decides when to move forward, he said.
The stock crashed after CHDN’s earnings report. Given its high valuation going into the announcements, fleeing investors may be creating a buying opportunity for what is arguably America’s best gaming growth company.
- Monarch Casino (MCRI) has not been buying back shares of stock and maintains its conservative dividend. That means the debt-free company is piling up even more cash than before. Jefferies analyst David Katz projects that MCRI now will have $327 million in cash by the end of next year. That’s more than $17 a share. That means cash will amount to almost one-quarter of the stock’s current price.
And, while MCRI certainly can find uses for that mountain of money – resume share repurchases, pay a special dividend, make an acquisition – for now it is definitely defensive.
Meanwhile, one company has announced a new project. Penn Entertainment (PENN) says it will convert its Council Bluffs, Iowa, riverboat to a land-based casino.
That is a very conservative investment, yet the kind that has proven everywhere to be a money maker. It may be considered a defensive move in a market that is seeing increased competition from neighboring Nebraska. It also is a big turn away from the kinds of risky investments PENN has made with its online ventures.
We’ll see what other companies have to say and do in coming days and weeks, but so far, it’s not damn the torpedoes full speed ahead.
PERSONAL NOTE
Congratulations to Gaming Arts CEO Mike Dreitzer on being appointed as chair of the Nevada Gaming Control Board.
Mike is an earnest, thoughtful person who can be expected to bring strong personal attributes and high character as well as extensive knowledge to what may be the most important regulatory job in the gaming industry.
Good luck, Mike.
