Pinnacle entertainment fell short of analysts’ earnings and revenue estimates in the second quarter of FY14 due to weak demand and costs related to integration of mychoice program
Pinnacle Entertainment Inc. (PNK) stock fell 6.28% yesterday after the company announced second-quarter results for its fiscal ‘14 (2QFY14), which missed analysts’ revenue and earnings estimates. Pinnacle reported per-share earnings (EPS) of $0.37, missing estimates by 19.21%. Sales were $555 million, which missed the consensus estimate by 0.35%.
Due to results like these and continuing weakness in the industry, Pinnacle stock has dropped 13.1% since the beginning of the year. The company has also underperformed competitor Las Vegas Sands Corp. (LVS) by about six percentage points (ppts) year-to-date. Compared to Pinnacle’s earnings miss by 19.2%, Las Vegas Sands missed the Street’s estimates by 4.9%.
Pinnacle’s sales grew 108% year-over-year (YoY), primarily because Ameristar Casino was added to the company’s portfolio. The Ameristar acquisition had to earn the Federal Trade Commission’s (FTC) approval, which it eventually did. The management claims that it will result in annual synergies of $58 million for the company.
The gaming and hospitality company experienced weak consumer demand across the majority of the markets. That, and harsh and inclement weather, impacted first-quarter results and the pent-up demand also failed to materialize in this quarter. The company also accrued costs related to the launch of its “mychoice” customer loyalty program. As a result of this integration, the company missed earnings estimates, which had already been revised downward by roughly 8.4% following Las Vegas Sands’ weaker-than-expected results earlier this month.
The most recent development for the company was a suggestion by Orange Capital – a global investment banking firm – that it separate its real estate into an independent and publicly listed real-estate investment trust, which would be distributed among shareholders through a tax-free spin-off. The bank claims it would result in a 60-90% increase in Pinnacle’s current share price. Despite the bank’s carefully calibrated methodology, however, the company has not responded to the suggestion.
Pinnacle stock is down about 2% in early trading on the NYSE.
