On Dec 2, 2014, Zacks Investment Research downgraded Churchill Downs Inc. (CHDN) to a Zacks Rank #5 (Strong Sell) due to disappointing third-quarter 2014 earnings.
Why the Downgrade?
Churchill Downs witnessed sharp downward estimate revisions after reporting disappointing third-quarter 2014 results. Shares of this Kentucky-based gaming company have been declining since then and given the negative earnings growth rate expectations in the upcoming quarters, it has more downside left.
Not surprisingly, analysts continued to revise their earnings estimates significantly lower for Churchill Downs. Therefore, the Zacks Consensus Estimate for fiscal 2014 was lowered 16.2% to $3.08 per share from $3.58 over the last 60 days. For 2015, the Zacks Consensus Estimate nosedived 5.5% over the same time frame.
On Oct 29, Churchill Downs reported third-quarter earnings of 20 cents per share which missed the Zacks Consensus Estimate of 31 cents by 35.5%. It was the company's fourth consecutive quarterly earnings miss.
Earnings were affected by lower-than-expected revenues which declined 6% year over year and also missed the Zacks Consensus Estimate by 2%. The company was affected by the closure of racing operations at Calder and the loss of Texas online wagering. Further, soft regional gaming trends and changes in the legal and tax environment affected the company’s online operations.
Also, the recent acquisition of Big Fish Games for roughly $885 million failed to impress investors as it is not expected to have a major impact on Churchill Downs’ revenues and earnings, going forward.
Stocks That Warrant a Look
Better-ranked stocks in the same industry include Isle of Capri Casinos, Inc. (ISLE), Penn National Gaming Inc. (PENN) and Monarch Casino & Resort Inc. (MCRI). All these stocks sport a Zacks Rank #1 (Strong Buy).
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