Joe Hendrickson
Churchill Downs Incorporated (NASDAQ:CHDN) is viewed favorably by Macquarie after the company reported strong Q4 results. The racetrack and casino operator company revenue rose 17% year-over-year to $$561.2M. CHDN pointed to a boost from Virginia properties acquired in the P2E Transaction, higher revenue from Derby City Gaming, as well as contributions from the opening of Derby City Gaming Downtown and continued growth from Oak Grove in Southwestern Kentucky. Revenue was slightly higher from a year ago at the Churchill Downs Racetrack, which will feature the 150th running of the Kentucky Derby in early May.
Looking ahead, analyst Chad Beynon sees a "nice multi-year" pipeline of growth projects with Terre Haute set to open in early April, the Kentucky Derby featuring an upgraded Paddock experience, the Rose in Dumfries opening later in the year, and the Owensboro opening in early 2025.
"We favor other sectors above regional gaming, but we believe CHDN stands out given growth from ramping of its P2E/Exacta acquisitions and the capital projects coming online. We conservatively estimate CHDN will be able to grow EBITDA double digits in '25E and when ramped, we expect CHDN to deliver $8+ of EPS and still believe CHDN can support a >20x P/E multiple given its historical trading, 7% annual dividend raises and iconic asset (Churchill Downs)."
Macquarie kept an Outperform rating on Churchill Downs (CHDN) and boosted its price target to $152, based on a blend of 12X estimated 2025 EBITDA, 13X estimated 2024-26 free cash flow, and 13X estimated 2024-2026 P/E. Catalysts seen for CHDN include monthly gross gaming revenue improvement, project execution, and the spotlight from the Kentucky Derby.
Shares of Churchill Downs (CHDN) have traded flat over the last 52 weeks.