Casino, sports betting and entertainment operator PENN Entertainment (NASDAQ: PENN) fell short of the market’s revenue expectations in Q1 CY2025 as sales rose 4.1% year on year to $1.67 billion. Its non-GAAP loss of $0.25 per share was significantly below analysts’ consensus estimates.
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PENN Entertainment (PENN) Q1 CY2025 Highlights:
- Revenue: $1.67 billion vs analyst estimates of $1.7 billion (4.1% year-on-year growth, 1.6% miss)
- Adjusted EPS: -$0.25 vs analyst estimates of -$0.07 (significant miss)
- Operating Margin: 2.6%, up from -1.3% in the same quarter last year
- Free Cash Flow was $125.2 million, up from -$110.1 million in the same quarter last year
- Market Capitalization: $2.38 billion
Company Overview
Established in 1982, PENN Entertainment (NASDAQ: PENN) is a diversified American operator of casinos, sports betting, and entertainment venues.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, PENN Entertainment grew its sales at a sluggish 5.3% compounded annual growth rate. This was below our standard for the consumer discretionary sector and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. PENN Entertainment’s recent performance shows its demand has slowed as its annualized revenue growth of 1% over the last two years was below its five-year trend. Note that COVID hurt PENN Entertainment’s business in 2020 and part of 2021, and it bounced back in a big way thereafter. 
We can better understand the company’s revenue dynamics by analyzing its most important segment, Northeast Region. Over the last two years, PENN Entertainment’s Northeast Region revenue (casinos, hotels) averaged 1.8% year-on-year growth. This segment has outperformed its total sales during the same period, lifting the company’s performance.
This quarter, PENN Entertainment’s revenue grew by 4.1% year on year to $1.67 billion, falling short of Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 6.9% over the next 12 months. Although this projection implies its newer products and services will spur better top-line performance, it is still below average for the sector.
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Operating Margin
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
PENN Entertainment’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 3% over the last two years. This profitability was lousy for a consumer discretionary business and caused by its suboptimal cost structure.
This quarter, PENN Entertainment generated an operating profit margin of 2.6%, up 3.9 percentage points year on year. This increase was a welcome development and shows it was more efficient.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Sadly for PENN Entertainment, its EPS declined by 30.4% annually over the last five years while its revenue grew by 5.3%. This tells us the company became less profitable on a per-share basis as it expanded.
In Q1, PENN Entertainment reported EPS at negative $0.25, up from negative $0.79 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.
Key Takeaways from PENN Entertainment’s Q1 Results
We struggled to find many positives in these results as its revenue and EPS fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 1.1% to $15.53 immediately following the results.
PENN Entertainment underperformed this quarter, but does that create an opportunity to invest right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
