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Here's Why Investors Should Buy Churchill Downs (CHDN) Stock
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Churchill Downs Incorporated (CHDN - Free Report) is benefiting from solid project capital investments, strategic partnerships and accretive acquisitions. The focus on driving long-term shareholders’ value and Historical Racing Machines (HRMs) bodes well.
Shares of CHDN have gained 11.6% in the past three months compared with the Zacks Gaming industry’s 23.6% growth. Consistent investments in growth-driving strategies and effective implementation of such methods are likely to aid the company’s prospects.
Image Source: Zacks Investment Research
What Makes the Stock Attractive?
Solid Capital Investments: Churchill Downs tends to focus on strategic project capital investments as its main growth initiative, which is incorporated in the form of building new properties or revamping existing ones. Capital investments focus on inorganic initiatives and reflect organic growth strategies, accompanied by the expansion and diversification of product offerings.
On May 15, 2024, CHDN unveiled its first entertainment property in Indiana, the Terre Haute Casino Resort. CDI believes that the combination of an unparalleled gaming experience and a new luxury hotel will position Terre Haute and the company for strong growth prospects.
During first-quarter 2024, it completed the new Paddock project, which is the most significant construction development ever at Churchill Downs Racetrack, for an investment of about $200 million. The company expects the Rose Gaming Resort, which is a historical racing machine (HRM) entertainment venue, to open in third-quarter 2024. The total investment in this resort was approximately $460 million. For 2024, CHDN expects to spend $90-$105 million for maintenance and $450-$550 million for new projects. It is optimistic about its project pipeline, which includes the 2025 Derby project.
Strategic Collaborations: The company benefits from strategic partnerships by enhancing growth opportunities and expanding market reach. On Jul 3, 2024, CHDN, through its subsidiary Exacta Systems, partnered with International Game Technology PLC and National Lottery plc to offer historical horse racing (HHR) solutions in Malta. This agreement marks the first use of HHR technology outside the United States, supporting the international expansion goals of International Game and Exacta Systems.
Exacta Services, part of Exacta Systems, will use the Exacta Connect system to ensure compliance and smooth operation on the property's gaming floor. Churchill Downs is optimistic about this opportunity, believing that the adaptability of Exacta Connect to various markets and regulations will support growth prospects.
Focus on HRM Properties: On Aug 22, 2023, the company completed its acquisition of Exacta Systems, LLC, a leader in central determinate system technology for HRMs nationwide, for $248.2 million. This acquisition significantly enhanced the performance of Virginia HRM venues by optimizing gaming floors and reducing technology fees.
Its strategic approach to HRM investments delivered robust returns on capital, including from acquisitions of complementary technologies. Expansion plans in Kentucky include the construction of the Owensboro HRM venue, scheduled to open in first-quarter 2025, marking the seventh venue in the state. The company also has one more HRM venue permitted under Kentucky law for future development.
CHDN anticipates having approximately 4,450 operational HRMs across Virginia, with the completion of the Rose by the end third-quarter 2024. It is exploring additional HRM development opportunities in Virginia and plans to deploy the remaining 500-plus machines permitted under the law by 2025. The company is analyzing strategies to optimize the overall performance of its Virginia HRM business, which includes considering potential shifts of existing machines to other locations.
Valuation & Earnings Growth
With a forward 12-month price-to-earnings of 20.57X, which is well below the industry average of 29.38X, the stock presents a potentially attractive valuation for investors.
The company’s earnings estimates for 2024 suggest growth rate of 21% from the year-ago period’s levels on a 10.7% revenue improvement. Its earnings beat estimates in three of the trailing four quarters and missed once, the average surprise being 16.1%. The positive trend signifies bullish analysts’ sentiments and robust fundamentals in the near term.
Conclusion
The company is delivering value to its shareholders with consistent strategies and execution over an extended period. CHDN has a strong pipeline of growth opportunities in development beyond those already announced. The company expects a significant increase in adjusted EBITDA and free cash flow in the coming years while maintaining a strong balance sheet within the industry. Investors might consider adding this Zacks Rank #2 (Buy) stock to their portfolios.
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The Zacks Consensus Estimate for ATGE’s fiscal 2025 sales and EPS indicates an increase of 8.3% and 16.4%, respectively, from year-ago levels.
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Here's Why Investors Should Buy Churchill Downs (CHDN) Stock
Churchill Downs Incorporated (CHDN - Free Report) is benefiting from solid project capital investments, strategic partnerships and accretive acquisitions. The focus on driving long-term shareholders’ value and Historical Racing Machines (HRMs) bodes well.
Shares of CHDN have gained 11.6% in the past three months compared with the Zacks Gaming industry’s 23.6% growth. Consistent investments in growth-driving strategies and effective implementation of such methods are likely to aid the company’s prospects.
Image Source: Zacks Investment Research
What Makes the Stock Attractive?
Solid Capital Investments: Churchill Downs tends to focus on strategic project capital investments as its main growth initiative, which is incorporated in the form of building new properties or revamping existing ones. Capital investments focus on inorganic initiatives and reflect organic growth strategies, accompanied by the expansion and diversification of product offerings.
On May 15, 2024, CHDN unveiled its first entertainment property in Indiana, the Terre Haute Casino Resort. CDI believes that the combination of an unparalleled gaming experience and a new luxury hotel will position Terre Haute and the company for strong growth prospects.
During first-quarter 2024, it completed the new Paddock project, which is the most significant construction development ever at Churchill Downs Racetrack, for an investment of about $200 million. The company expects the Rose Gaming Resort, which is a historical racing machine (HRM) entertainment venue, to open in third-quarter 2024. The total investment in this resort was approximately $460 million. For 2024, CHDN expects to spend $90-$105 million for maintenance and $450-$550 million for new projects. It is optimistic about its project pipeline, which includes the 2025 Derby project.
Strategic Collaborations: The company benefits from strategic partnerships by enhancing growth opportunities and expanding market reach. On Jul 3, 2024, CHDN, through its subsidiary Exacta Systems, partnered with International Game Technology PLC and National Lottery plc to offer historical horse racing (HHR) solutions in Malta. This agreement marks the first use of HHR technology outside the United States, supporting the international expansion goals of International Game and Exacta Systems.
Exacta Services, part of Exacta Systems, will use the Exacta Connect system to ensure compliance and smooth operation on the property's gaming floor. Churchill Downs is optimistic about this opportunity, believing that the adaptability of Exacta Connect to various markets and regulations will support growth prospects.
Focus on HRM Properties: On Aug 22, 2023, the company completed its acquisition of Exacta Systems, LLC, a leader in central determinate system technology for HRMs nationwide, for $248.2 million. This acquisition significantly enhanced the performance of Virginia HRM venues by optimizing gaming floors and reducing technology fees.
Its strategic approach to HRM investments delivered robust returns on capital, including from acquisitions of complementary technologies. Expansion plans in Kentucky include the construction of the Owensboro HRM venue, scheduled to open in first-quarter 2025, marking the seventh venue in the state. The company also has one more HRM venue permitted under Kentucky law for future development.
CHDN anticipates having approximately 4,450 operational HRMs across Virginia, with the completion of the Rose by the end third-quarter 2024. It is exploring additional HRM development opportunities in Virginia and plans to deploy the remaining 500-plus machines permitted under the law by 2025. The company is analyzing strategies to optimize the overall performance of its Virginia HRM business, which includes considering potential shifts of existing machines to other locations.
Valuation & Earnings Growth
With a forward 12-month price-to-earnings of 20.57X, which is well below the industry average of 29.38X, the stock presents a potentially attractive valuation for investors.
The company’s earnings estimates for 2024 suggest growth rate of 21% from the year-ago period’s levels on a 10.7% revenue improvement. Its earnings beat estimates in three of the trailing four quarters and missed once, the average surprise being 16.1%. The positive trend signifies bullish analysts’ sentiments and robust fundamentals in the near term.
Conclusion
The company is delivering value to its shareholders with consistent strategies and execution over an extended period. CHDN has a strong pipeline of growth opportunities in development beyond those already announced. The company expects a significant increase in adjusted EBITDA and free cash flow in the coming years while maintaining a strong balance sheet within the industry. Investors might consider adding this Zacks Rank #2 (Buy) stock to their portfolios.
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The consensus estimate for AGS’s 2024 sales and earnings per share (EPS) suggests growth of 7.7% and 5,200%, respectively, from year-ago levels.
Adtalem Global Education Inc. (ATGE - Free Report) currently carries a Zacks Rank of 2. ATGE has a trailing four-quarter earnings surprise of 18.8%, on average. The stock has surged 79.8% in the past year.
The Zacks Consensus Estimate for ATGE’s fiscal 2025 sales and EPS indicates an increase of 8.3% and 16.4%, respectively, from year-ago levels.
Royal Caribbean Cruises Ltd. (RCL - Free Report) currently carries a Zacks Rank of 2. RCL has a trailing four-quarter earnings surprise of 18.3%, on average. The stock has rallied 61.8% in the past year.
The Zacks Consensus Estimate for RCL’s 2024 sales and EPS calls for growth of 16.9% and 64%, respectively, from the year-ago levels.