Regional gaming slowdown reduces Penn National's second-quarter results
25 Jul 2012
By Howard Stutz
By Howard Stutz
The company, which owns the M Resort, said Tuesday its net income for the quarter that ended June 30 was $66.7 million, down 12 percent from $76 million in the same quarter a year ago. Penn's earnings per share was 63 cents, compared with 71 cents in the same quarter of 2011.
Penn's overall revenues were $712.6 million, compared with $687.9 million a year ago.
Credit Suisse gaming analyst Joel Simkins said Penn was able to modestly exceed its second-quarter guidance, but the results reflect a slowdown after a "blistering" first quarter.
"We think the early read will be that 'it could have been worse' as [Wall] Street estimates have been declining in recent weeks," Simkins told investors.
Penn National did not break out results for M Resort, which the company acquired a year ago. M Resort is listed as part of the company's East/West Division, which reported revenues of $348.6 million in the quarter, up from $318.6 million a year ago.
There was very little discussion about Las Vegas during Penn's quarterly conference call with analysts and investors. Penn National President Tim Wilmott said the company scaled back some marketing expenses to improve profits.
"The locals market continues to be sluggish out there," Wilmott said. "Promotional activity is slightly more rational than what we saw a couple quarters ago. We've been able to take advantage of that market even though ... it's still a very sluggish market."
Most of the attention on Penn centered around Ohio. The company opened the Hollywood Casino Toledo at the end of May and announced its Hollywood Columbus Casino would open in early October. The company will also spend $275 million apiece to move two Ohio racetrack casinos to new locations in Austintown and Dayton, which are anticipated to open in 2014.
The Hollywood Toledo Casino collected $20.4 million in gaming revenue in June, its first full month of operation.
Penn is spending $610 million to buy Harrah's St. Louis from Caesars Entertainment Corp., a deal expected to close by the end of the year.
"While the revenue growth over the next couple of years will be positive given the development pipeline, Penn has had to deploy significant amounts of capital to drive this growth, as many of its existing markets remain challenged," Macquarie Securities gaming analyst Chad Beynon told investors.
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