Casino, sports betting and entertainment operator PENN Entertainment (NASDAQ:PENN) missed Wall Street’s revenue expectations in Q1 CY2025 as sales rose 4.1% year on year to $1.67 billion. Its non-GAAP EPS of $0.25 per share was 92.3% below analysts’ consensus estimates.
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PENN Entertainment (PENN) Q1 CY2025 Highlights:
- Revenue: $1.67 billion (4.1% year-on-year growth)
- Adjusted EPS: -$0.25
- Operating Margin: 2.6%, up from -1.3% in the same quarter last year
- Market Capitalization: $2.27 billion
StockStory’s Take
PENN Entertainment’s first quarter was shaped by several operational headwinds, particularly severe weather events that management said impacted its casino properties in January and February. CEO Jay Snowden noted that weather-impacted days in February were up more than threefold compared to last year, resulting in at least $10 million of lost adjusted EBITDAR. Despite these challenges, the company reported a rebound in gaming volume in March and highlighted improved engagement from VIP and mid-tier customers, attributed to past investments in property upgrades and the expansion of ESPN BET retail sportsbooks. Management also discussed market-specific accounting effects and competitive pressures, including new supply in select regions, which affected year-over-year comparisons.
Looking ahead, PENN Entertainment is focused on several growth initiatives, including the rollout of new land-based casinos and enhancements to its digital business. Management reiterated plans to open four major development projects within the next year, emphasizing the anticipated benefits to both customer experience and operational efficiency. Jay Snowden stated, “We are nearing an inflection point, and we anticipate each quarter of '25 to deliver a lower loss sequentially throughout the year in our Interactive division to be profitable in the fourth quarter of '25 and the full-year of '26 and beyond.” The company’s guidance assumes continued momentum in its iCasino business, ongoing integration of ESPN BET features, and careful management of construction costs amidst tariff uncertainty.
Key Insights from Management’s Remarks
Management attributed Q1 performance to weather-related headwinds, ongoing investments in property upgrades, and digital segment momentum, while highlighting progress on strategic development projects and customer engagement initiatives.
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Severe weather impact: Management attributed lower retail gaming volumes in January and February to significant weather disruptions, with February seeing more than three times as many weather-impacted days as the prior year. This led to an estimated $10 million reduction in adjusted retail EBITDAR for the quarter.
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Digital engagement and cross-sell: The company saw increased customer engagement in its digital segment, especially with its standalone Hollywood iCasino app in Pennsylvania and Michigan. Jay Snowden cited that 70% of iCasino theoretical revenue was incremental, coming from new or reactivated customers, and highlighted successful cross-sell from retail to digital channels.
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Strategic property upgrades: PENN continued to invest in property enhancements, including the planned replacement of aging riverboat casinos with new land-based facilities, such as the upcoming Hollywood Casino in Council Bluffs, Iowa. These projects are expected to improve customer experience and competitive positioning in key markets.
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Margin management: Despite external pressures like tariffs and labor cost increases, the company emphasized efforts to maintain high retail gaming margins through procurement strategies, technology investments, and operational efficiencies. CFO Felicia Hendrix noted that their procurement team played a key role in mitigating cost increases.
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Leadership and product development: PENN appointed Billy Turchin as Chief Product Officer to lead digital sports betting and gaming product teams. Management also rolled out new features for ESPN BET, including the Mint Club rewards program, and reported ongoing improvements in cross-platform integration and personalization.
Drivers of Future Performance
PENN’s guidance is driven by upcoming property openings, digital expansion, and the integration of new customer engagement features amid industry headwinds.
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Casino project pipeline: Management expects the opening of four new or upgraded land-based casino properties over the next 12 to 14 months to drive both revenue growth and operational efficiencies. These projects are concentrated in markets where competitive pressures are stabilizing, and are backed by flexible financing options to manage capital costs.
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Digital platform evolution: The company is investing in enhancing its digital offerings, including further integration between ESPN BET and core casino operations. Initiatives such as the Mint Club rewards program and the expansion of standalone iCasino apps are expected to improve customer retention and cross-sell, while management believes incremental revenue from digital channels will help offset slower growth in traditional sports betting.
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Cost management and margin focus: PENN plans to continue mitigating inflationary and tariff-related cost pressures through procurement discipline, flexible labor and marketing strategies, and leveraging scale. Management also highlighted the importance of sustaining high margin performance, particularly as new projects ramp up and weather-related volatility subsides.
Catalysts in Upcoming Quarters
Looking forward, the StockStory team will be monitoring (1) the ramp-up and customer response to PENN’s new and upgraded casino projects, (2) sequential improvement in digital profitability as cross-sell and personalization features scale, and (3) any regulatory or market developments affecting sports betting and iCasino expansion, including new state launches. Execution on these fronts will be critical in tracking PENN’s ability to deliver on its strategic priorities.
PENN Entertainment currently trades at a forward EV-to-EBITDA ratio of 1.5×. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).
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