Penn Entertainment’s fourth-quarter earnings forecast has received a positive adjustment, thanks to stronger-than-anticipated regional gaming performance, according to a recent J.P. Morgan report. However, adverse winter conditions are expected to weigh on early 2025 results.
Gaming Revenue Trends Offer Mixed Signals
J.P. Morgan analyst Joseph Greff highlighted state-reported gaming revenue data showing robust demand both before and after the presidential election. October, in particular, was a standout month, partially offsetting weaker outcomes in December driven by unfavourable sports results.
“October was a strong month,” Greff said, “which partially offsets our lower Interactive EBITDA estimates as a result of well-known unfavourable sports outcomes in December.”
For Penn’s regional gaming operations, Greff estimates that fourth-quarter revenue rose by 3% year-over-year, a significant rebound compared to declines earlier in 2024:
- Q3: Down 2%
- Q2: Flat
- Q1: Down 4%
Breaking down monthly figures, October and November showed growth of 5% and 9%, respectively, while December saw a 3.5% decline, reflecting fewer weekend days and construction-related disruptions.
Fourth-Quarter Estimates and Performance Outlook
Greff has updated his fourth-quarter projections for Penn Entertainment, revising some figures upwards while tempering expectations for others:
- Land-Based EBITDAR: Estimated at $467 million, up from $457 million.
- Interactive Segment Losses: Increased to $105 million from $90 million due to sports betting outcomes.
Penn is set to report its Q4 results on February 27. Analysts expect management to address the impact of severe weather conditions on gaming revenue. However, potential recapture in the iCasino segment may soften the blow.
Longer-Term Financial Projections
Looking beyond Q4, J.P. Morgan has made slight adjustments to its 2025 and 2026 forecasts for Penn Entertainment:
- 2025 and 2026 Land-Based EBITDAR: Largely unchanged, with estimates remaining steady.
- Interactive Segment EBITDA: Reduced by $20 million for each year:
- 2025: From a $50 million loss to a $70 million loss.
- 2026: From an $80 million profit to a $60 million profit.
Greff also factored in approximately $80 million in market access fees contributing to the 2026 Interactive segment estimate. Overall EBITDAR after corporate expenses now stands at:
- Q4 2024: $332 million, down from $338 million.
- 2025: $1.685 billion, down from $1.705 billion.
- 2026: $1.88 billion, down from $1.9 billion.
Stock Outlook Remains Steady Despite Adjustments
Despite these revisions, J.P. Morgan maintained its year-end 2025 price target of $27 for Penn Entertainment, reflecting confidence in the company’s ability to navigate challenges. As of now, Penn’s stock is trading around $20, indicating room for growth if projections align with actual performance.
With demand trends showing resilience and weather conditions being a temporary setback, Penn Entertainment’s future remains cautiously optimistic.