Penn National Plunges as Regional Gaming Continues to Struggle
Penn National didn't report anything surprising in today's first-quarter earnings announcement, but it also didn't report much of an improvement in the regional gaming market that's been struggling since the recession began. As a result, the stock took a nosedive today.
Quarterly revenue came in at $641.1 million, which was slightly ahead of expectations, and EBITDA was $70.4 million, which was just below expectations. EBITDA was down from $220.7 million a year ago, primarily because Penn National is now paying rent for properties it operates in.
One of the drivers of Penn National over the last two years was the spinoff of a real estate investment trust called Gaming and LeisureProperties, which now holds most of Penn National's real estate assets. But that also transferred a lot of the value to the new entity and $174.7 million in rent last quarter as well. With that payment, Penn National had just $4.5 million in net income left for shareholders.
The big takeaway is that gaming conditions in the regional gaming market simply aren't improving, and there are reasons to think they'll get worse.
Making its own problems worse
While trends weren't good last quarter, I don't think they'll get better anytime soon. Penn National touted construction currently taking place in New Mexico, Massachusetts, California, and two locations in Ohio as drivers of growth. These will further expand gaming offerings in the U.S., and it's that expansion of gaming that's hurt profits in the industry, including Penn National.
As states have legalized gaming across the country, new casinos have gone up, but the number of gaming dollars they're splitting hasn't kept pace with supply growth. The result is falling profits, something we're seeing across the industry.
Foolish bottom line
If you're interested in getting exposure to gaming, the U.S. regional market simply isn't the place to do it. Profits are low, if they exist at all, and competition is only increasing. Instead, focus your attention on Macau, where competition is limited by the government and gaming revenue is increasing far more quickly than it is in the U.S.
Will this stock be your next 10-bagger?
Where should you be putting money instead of regional gaming? Give me five minutes and I'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks one stock with amazing potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upward of 908%, 1,252% and 1,303%! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.
The article Penn National Plunges as Regional Gaming Continues to Struggle originally appeared on Fool.com.Travis Hoium has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.