Century Casinos Q3 Results Miss Estimates, But Operator Will Close Three Eldorado Purchases Sooner Than Expected

Posted on: November 4, 2019, 09:07h. 

Last updated on: November 4, 2019, 10:58h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Century Casinos, Inc. (NASDAQ:CNTY) saw its stock rally early Monday even after the regional gaming company reported third-quarter results that missed consensus estimates. But the operator did say it expects to finalize purchases of three venues from Eldorado Resorts Inc. (NASDAQ:ERI) sooner than previously expected.

Century Casinos reported tepid Q3 numbers, but analysts still see the stock as a big winner going forward. (Image: Uncover Colorado)

For the quarter ending Sept. 30, Century earned two cents a share on revenue of $52.94 million.? That marks the fourth consecutive reporting period in which the company was unable to meet or beat earnings estimates. Wall Street expected earnings of eight cents per share on revenue of about $53 million.

Analysts said multiple factors accounted for Colorado-based Century’s slack third-quarter showing.

Three items accounted for the relative under-performance in the quarter: 1.) A softer than anticipated margin ramp at Century Mile, 2.) Greater than anticipated construction-related margin disruption at Century Downs, and 3.) Evidence of margin softness in Cripple Creek, an outcome we attribute to elevated promotional activity in the market,” said Stifel analyst Brad Boyer in a note out Monday.

The company’s two US properties are both located in Colorado, and each bear the Century Casino name. Its Polish venue, Casinos Poland, was a source of strength in the third quarter, beating earnings before interest, taxes, depreciation and amortization (EBITDA estimates by a wide margin ($2.5 million USD actual vs. a $2.1 USD million forecast).

Some Good News

While earnings disappointed, Century Casinos did say it expects to close on the purchases of the Mountaineer Casino Racetrack and Resort in West Virginia and the Isle Casino Cape Girardeau and Lady Luck Casino – both in Missouri – sooner than expected.

Eldorado Resorts announced the sale of those properties in June just days before the regional gaming company unveiled a $17.3 billion takeover for Caesars Entertainment (NASDAQ:CZR). Century is paying $107 million for the gaming assets of those venues, while Vici Properties (NYSE:VICI) is shelling out $278 million for the real estate.

Century management indicated it expects all three deals will close before the end of this year, pending approval by gaming regulators in Missouri. Assuming that timeline is met, it could be a boon for Century stock.

“We continue to believe the current share price fails to properly factor in CNTY’s pending acquisition of three properties from ERI in a deal that is expected to close over the next two months,” said Boyer.

More Upside?

Shares of Century are up almost five percent over the past month, driving the stock north of $8. But some analysts believe it can rally even further, and the consensus price target on the name is $12.25.

“Furthermore, although margins were softer than expected in the quarter, we continue to believe the macroeconomic backdrop in each of the company’s operating markets creates the potential for outsized top-line growth for the foreseeable future,” said Boyer.

The Stifel analyst has a “buy” rating on Century Casinos with a $12 price forecast, implying upside of nearly 50 percent from current levels.