Monarch (NASDAQ:MCRI) Misses Q1 Revenue Estimates

Max Juang /
2024/04/17 4:09 pm EDT

Luxury casino and resort operator Monarch (NASDAQ:MCRI) fell short of analysts' expectations in Q1 CY2024, with revenue up 4.3% year on year to $121.7 million. It made a GAAP profit of $0.93 per share, improving from its profit of $0.90 per share in the same quarter last year.

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Monarch (MCRI) Q1 CY2024 Highlights:

  • Revenue: $121.7 million vs analyst estimates of $122.3 million (0.5% miss)
  • EPS: $0.93 vs analyst expectations of $0.96 (3.4% miss)
  • No forward guidance was provided in the earnings release
  • Gross Margin (GAAP): 52.5%, up from 51.5% in the same quarter last year
  • Market Capitalization: $1.33 billion

CEO Comment John Farahi, Co-Chairman and Chief Executive Officer of Monarch, commented: “In the first quarter of 2024 net revenue and adjusted EBITDA grew to all-time first quarter records of $121.7 million and $38.5 million, respectively, and the EBITDA margin improved to 31.7% from 31.3% in the same period of the prior year.

Established in 1993, Monarch (NASDAQ:MCRI) operates luxury casinos and resorts, offering high-end gaming, dining, and hospitality experiences.

Casino Operator

Casino operators enjoy limited competition because gambling is a highly regulated industry. These companies can also enjoy healthy margins and profits. Have you ever heard the phrase ‘the house always wins’? Regulation cuts both ways, however, and casinos may face stroke-of-the-pen risk that suddenly limits what they can or can't do and where they can do it. Furthermore, digitization is changing the game, pun intended. Whether it’s online poker or sports betting on your smartphone, innovation is forcing these players to adapt to changing consumer preferences, such as being able to wager anywhere on demand.

Sales Growth

A company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one may grow for years. Monarch's annualized revenue growth rate of 15.8% over the last five years was decent for a consumer discretionary business. Monarch Total RevenueWithin consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. Monarch's recent history shows the business has slowed as its annualized revenue growth of 8.7% over the last two years is below its five-year trend.

This quarter, Monarch's revenue grew 4.3% year on year to $121.7 million, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 1.8% over the next 12 months, a deceleration from this quarter.

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Operating Margin

Operating margin is an important measure of profitability. It’s the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. Operating margin is also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Monarch has been a well-oiled machine over the last two years. It's demonstrated elite profitability for a consumer discretionary business, boasting an average operating margin of 22.6%. Monarch Operating Margin (GAAP)

This quarter, Monarch generated an operating profit margin of 19.6%, in line with the same quarter last year. This indicates the company's costs have been relatively stable.

Over the next 12 months, Wall Street expects Monarch to maintain its LTM operating margin of 21.9%.

Key Takeaways from Monarch's Q1 Results

We struggled to find many strong positives in these results. Its EPS missed and its revenue fell short of Wall Street's estimates. Overall, this was a mixed quarter for Monarch. The company is down 1.4% on the results and currently trades at $68.47 per share.

Monarch may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.