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Why Penn National Gaming investors can bet on 3Q14 results

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Part 3
Why Penn National Gaming investors can bet on 3Q14 results PART 3 OF 13

Penn National Gaming’s must-know revenue by segment

Operating segments

Penn National Gaming, Inc.’s (PENN) operating segments are three-fold:

  • East/Midwest
  • West
  • Southern Plains

Penn National Gaming’s must-know revenue by segment

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The above chart shows that PENN derives more than half of its revenue from the East/Midwest segment, while it derives 34% and 9% of its revenues from the Southern Plains and West segments, respectively.

East/Midwest – This segment reported net revenues for nine months of ~$1,082 million, down 16.3% year-over-year. Adjusted earnings before interest, taxes, depreciation, amortization, and rental lease expense (or EBITDAR) declined by 21.1% year-over-year to ~$324 million.

West – This segment reported net revenues for nine months of ~$179 million down 1.4% year-over-year . However, adjusted EBITDAR increased by 6.7% year-over-year  to ~$50 million.

Southern Plains – This segment reported net revenues for nine months of ~$659 million down 14.8% year-over-year. Adjusted EBITDAR also declined by 11.9% year-over-year to ~$213 million.

Quarterly performance

Both net revenues and adjusted EBITDAR declined, by 8.0% and 11.7% year-over-year, respectively for the East/Midwest segment. For the Southern Plains segment, these measures fell by 14.7% and 10.2% year-over-year, respectively. Meanwhile, net revenues and adjusted EBITDAR increased by 2.0% and 28.0% year-over-year, respectively, for the West segment.

Timothy J. Wilmott, President and CEO of PENN, said, “During the third quarter we generated adjusted EBITDAR margin improvements in our Southern Plains and West operating segments. These results offset a slight decline in our East/Midwest segment… Demonstrating the effective implementation of strategies to improve operating efficiencies, consolidated third quarter 2014 adjusted EBITDAR margin grew approximately 50 basis points on a year over year basis to 26.4%.”

PENN’s peer group and key ETF

Companies including Boyd Gaming Corporation (BYD), Caesars Entertainment Corp (CZR), and Pinnacle Entertainment, Inc. (PNK) are peers of PENN. You could get a diversified portfolio in these companies if you invest in an ETF such as the Consumer Discretionary Select Sector SPDR Fund (XLY).

PENN’s tax free spinoff had no positive impact on its share price. Continue reading to learn more.

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