Penn Stock Gets a Lift From Improved Regional Casino Outlook, Narrower Interactive Loss

Penn Entertainment (NASDAQ: PENN) stock traded higher Thursday after the gaming company reported solid second-quarter results, including a narrower-than-expected loss in its interactive business.

Although Penn’s bread and butter is its regional casino operations, the digital unit is a point of emphasis for analysts and investors because it’s been an area in which the operator previously committed some spending gaffes, particularly on the sports wagering front. A recent pivot to iGaming is improving performance at Penn’s digital unit. That segment notched second-quarter revenue of $349.4 million on an adjusted earnings before interest, taxes, depreciation and amortization loss of $9.4 million. The loss was better than what Wall Street expected.

He also highlighted interactive strength in Ontario, Canada thanks to “solid engagement” over the course of the World Cup. That could prove instructive regarding the operator’s July launch of theScore Bet platform in Alberta.

“Uncertainty on iCasino execution & margin ramp may remain an overhang for several quarters, though we take comfort in recent market share momentum, PENN’s already top-tier iCasino product, & omnichannel advantages with re-allocated development & marketing resources potentially accelerating momentum even further,” said Stifel analyst Jeffrey Stantial in a note out this morning.

Penn Regional Casinos Flexing Their Muscles

While the online wagering business commands plenty of attention, it shouldn’t be forgotten that Penn is the largest operator of regional casinos and it’s recently spent mightily to enhance some of those venues, particularly in the Midwest.

The operator recently wrapped up $360 million in spending to improve the Hollywood Casino Aurora while moving the Hollywood Casino Joliet to dry land after years of that being a riverboat casino. In June, Penn debuted a $100 million hotel tower at the Hollywood Casino Columbus in Ohio. Those moves, among others, are paying off.

In the second quarter, Penn regional casinos generated revenue of $1.5 billion on adjusted earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) of $517.4 million and adjusted EBITDAR margins of 34.4%. Those margins improved both sequentially and year-over-year. Jefferies analyst David Katz points out that Penn’s regional casinos beat consensus estimates in three of the four regions in which the operator does business.

“PENN’s FY26 guidance reflects a $31 million increase at the midpoint of Retail Adj. EBITDAR, ahead of the $18 million beat in the quarter,” he said in a report. “Notably, the 1Q retail guidance increase represented a $12 million pass-through of the quarterly upside. The company also lowered its lease-adjusted net leverage target to 5.2x-5.5x from 5.3x-5.7x.”

What Analysts Are Focusing On

Penn held a conference call with analysts this morning (details are forthcoming). Heading into the call, the points of emphasis likely are what the operator is seeing in the early stages post-launch in Alberta and updates on capital spending, including plans for Penn’s Ameristar Casino in Council Bluffs, Iowa.

Amid a spate of industry consolidation, Penn’s potential role in that equation is likely on analysts’ minds, too.