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Penn National First Quarter Profits Drop Due To Lethargic Economy, Bad Weather

Posted on April 26th, 2010

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Racetrack and casino operator Penn National Gaming Thursday reported an 11 percent drop in its first quarter profits from a year ago because of unpleasant weather during the first three months of the year and a decline in wagering due to the difficult economic condition.

For the quarter ended March 31, Penn National saw a net income of $36.2 million or 34 cents per share. For the same period last year, the company earned a net income of $40.7 million or 38 cents per share.

Revenue was $592.3 million from $612.2 million or a drop of 3.3 percent. Even with Penn’s first quarter drop, Wall Street remained hopeful. Joe Greff, gaming analyst at JP Morgan, told investors, “Despite revenue falling short of our estimate, we think due primarily to inclement first-quarter weather, Penn showed significant property level margin improvement in the period.” Penn National’s Chief Executive Officer Peter Carlino said the results were “not robust, but OK.”

“First-quarter revenue trends continue to reflect the current macroeconomic environment as well as a greater-than-anticipated impact of weather at several of our properties,” Carlino said in a statement. Carlino also said that some of the company’s properties will go on with their cost-saving measures. “However, it will take some time to return margins to previous levels generally, and our historically high margins will not be attainable until revenues return to prior levels,” Carlino said. Penn National told investors it is confident that the table games that have recently been added to the company’s slots-only casinos in West Virginia and Pennsylvania will do the company a lot of good, profit-wise.

Macquarie Securities gaming analyst Joel Simkins put emphasis on the company’s other regional casino development plans. “We believe investors will remain focused on timing and execution of new casino projects in Maryland, Kansas and Ohio over the next couple years. As well, while Penn has been quiet on the mergers and acquisition front, we believe more assets are likely to come on the market and the company will continue to look at selected opportunities,” he said.

Penn National Gaming shares rose 81 cents, or 2.75 percent, Thursday to close at $30.24 on the Nasdaq National Market. Penn National runs racetracks and casinos in other U.S. cities except Atlantic City and Las Vegas, although now it is considering buying a casino-hotel in Las Vegas.