Bally's (NYSE:BALY) Reports Sales Below Analyst Estimates In Q1 Earnings, Stock Drops

Petr Huřťák /
2024/05/01 4:58 pm EDT

Gaming, betting and entertainment company Bally's Corporation (NYSE:BALY) missed analysts' expectations in Q1 CY2024, with revenue up 3.3% year on year to $618.5 million. On the other hand, the company's outlook for the full year was close to analysts' estimates with revenue guided to $2.6 billion at the midpoint. It made a GAAP loss of $3.61 per share, down from its profit of $3.24 per share in the same quarter last year.

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Bally's (BALY) Q1 CY2024 Highlights:

  • Revenue: $618.5 million vs analyst estimates of $627.3 million (1.4% miss)
  • Adjusted EBITDA: $116.5 million vs analyst estimates of $119.9 million (2.8% miss)
  • EPS: -$3.61 vs analyst estimates of -$1.08 (-$2.53 miss)
  • The company reconfirmed its revenue guidance for the full year of $2.6 billion at the midpoint (also reconfirmed its full year EBITDAR guide)
  • Gross Margin (GAAP): 54%, down from 54.9% in the same quarter last year
  • Market Capitalization: $531.2 million

Robeson Reeves, Bally’s Chief Executive Officer, commented, “Bally’s is off to a solid start in 2024, driven by revenue growth in our Casinos & Resorts and North America Interactive segments. While International Interactive revenues fell 4.4% year-over-year in the aggregate, our core UK interactive operations grew revenues 12% (7% on a constant currency basis) as our strategies play out reflecting the initiatives we adopted in contemplation of the White Paper implementation in the UK. On a consolidated basis, revenues in the first quarter grew 3.3% year-over-year to $618.5 million.

Headquartered in Providence, Rhode Island, Bally's Corporation (NYSE:BALY) is a diversified global casino-entertainment company that owns and manages casinos, resorts, and online gaming platforms.

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

Reviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Bally's annualized revenue growth rate of 40.3% over the last five years was incredible for a consumer discretionary business. Bally's Total RevenueWithin consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. Bally's recent history shows its momentum has slowed as its annualized revenue growth of 21.3% over the last two years is below its five-year trend.

This quarter, Bally's revenue grew 3.3% year on year to $618.5 million, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 5.9% over the next 12 months, an acceleration from this quarter.

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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.

Although Bally's was profitable this quarter from an operational perspective, it's generally struggled when zooming out. Its high expenses have contributed to an average operating margin of negative 4% over the last two years. This performance isn't ideal as demand in the consumer discretionary sector is volatile. We prefer to invest in companies that can weather industry downturns through consistent profitability. Bally's Operating Margin (GAAP)

In Q1, Bally's generated an operating profit margin of 0.7%, down 62.2 percentage points year on year.

Over the next 12 months, Wall Street expects Bally's to become profitable. Analysts are expecting the company’s LTM operating margin of negative 10.1% to rise to positive 5.7%.

Key Takeaways from Bally's Q1 Results

It was encouraging to see Bally's maintain its full-year revenue and adjusted EBITDA guidance. On the other hand, its revenue, adjusted EBITDA, and EPS all missed Wall Street's estimates. Overall, this was a bad quarter for Bally's, and there could be questions about why guidance was not lowered despite the miss across the board this quarter. The company is down 7.7% on the results and currently trades at $12.16 per share.

Bally's 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.