On February 24, 2017, Penn National Gaming filed its annual operating results for 2016. The company is traded on NASDAQ under the symbol PENN.
PENN profiles itself as follows:
“Penn National Gaming, through its subsidiaries, owns, operates or has ownership interests in gaming and racing facilities with a focus on slot machine entertainment. The Company presently operates twenty-six facilities in seventeen jurisdictions, including Florida, Illinois, Indiana, Kansas, Maine, Massachusetts, Maryland, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Pennsylvania, Texas, West Virginia, and Ontario. In aggregate, Penn National’s operated facilities feature approximately 31,000 gaming machines, 800 table games and 3,000 hotel rooms.”
PENN is the third largest gaming company in the United States and owns the most horse racing tracks of any American firm:
Hollywood Casino at Charles Town Races (West Virginia)
Hollywood Casino at Mahoning Valley Race Couse (Ohio)
Hollywood Casino at Penn National Race Course (Pennsylvania)
Sam Houston Race Park (Texas)
Zia Park (New Mexico)–offers Thoroughbred and Quarter Horse racing
Hollywood Casino Bangor (Maine)
Hollywood Gaming at Dayton Raceway (Ohio)
Plainridge Park Casino (Massachusetts)
In 2016, Penn had net revenue of just over $3 billion in comparison with $2.8 billion in 2015. Net income in 2016 was slightly over $109 million in contrast to $686 thousand the year before. (Penn had operating losses in 2013 and 2014.) Diluted earnings per share were $1.19 in 2016 versus $.01 in 2015.
The preponderance of Penn revenues and profits derive from slot machines. In 2016, 87% of net revenue came from slots and the rest was from hotels, food/beverages, and pari-mutuel wagering at racetracks.
The overriding strategic strength and weakness of PENN are the same. As long as slots remain popular, PENN is well positioned. However, with slots accounting for such a large portion of revenue, the company is extremely vulnerable to a decline in the popularity of slots. In the short term this is unlikely to be a negative, yet over the longer term it remains to be seen whether tech-savvy millennials, as they age, will find slot play as attractive as today’s older generations.
In 2016, PENN sstock began the year at $16.02 per share and closed the year at $13.79 for a decrease of 14%. In 2017, the stock has recovered nicely and traded most recently at between $18 and $19 per share.
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