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On Thursday, Stifel analysts maintained their Buy rating on Churchill Downs (NASDAQ:CHDN) shares, with a consistent price target of $142.00. According to InvestingPro data, the company, currently valued at $6.5 billion, has seen its stock decline 21.34% year-to-date, suggesting potential opportunity despite 4 analysts recently revising earnings expectations downward. The firm’s analysis followed Churchill Downs’ first-quarter 2025 earnings report, which showed an adjusted EBITDA increase of 2% compared to Stifel’s model and was in line with the recently adjusted consensus expectations. These consensus figures had been reduced by 4% and 6% due to adverse weather conditions impacting the company’s operations. The company maintains strong fundamentals with trailing twelve-month revenue of $2.73 billion and EBITDA of $886.9 million. For deeper insights into Churchill Downs’ financial health and growth prospects, consider accessing the comprehensive Pro Research Report available on InvestingPro.
The report highlighted several unexpected factors affecting the company’s performance. Firstly, there was a noted decline in soft unrated play, particularly in Virginia, coupled with increased competitive pressure. Secondly, higher operational expenses for Virginia racing and a rise in the historical racing machine (HRM) tax rate were observed. However, these were balanced by robust growth in the same-store Kentucky HRM operations and improved growth and efficiencies in the Exacta Systems.
In a strategic shift due to prevailing macroeconomic uncertainties, Churchill Downs announced the postponement of their approximately $900 million Churchill Downs Racetrack (CDRT) project. Instead, they have opted for a smaller scale Finish Line/Mansion project estimated to cost between $25 and $30 million. This decision is seen by Stifel analysts as a cautious and sensible move, potentially lifting a significant concern for investors.
The analysts anticipate that investors may closely examine the company’s remarks on the softening of unrated play. Nevertheless, they suggest that stable sequential demand and positive comments on the progress in Dumfries and indicators for the upcoming Kentucky Derby could mitigate any adverse reactions to this news. Trading at a P/E ratio of 15.59x, Churchill Downs shows signs of undervaluation according to InvestingPro’s Fair Value analysis, with additional ProTips available for subscribers regarding the company’s dividend history and financial health metrics.
In other recent news, Churchill Downs Incorporated reported its first-quarter 2025 earnings, which fell short of market expectations. The company announced an earnings per share (EPS) of $1.02, missing the forecasted $1.11, and revenue of $642.6 million, below the expected $649.69 million. Despite achieving record first-quarter revenue and adjusted EBITDA, the company experienced challenges due to macroeconomic uncertainties impacting consumer spending. Consequently, Churchill Downs has paused a major capital project to reassess the economic environment. In response to these developments, Churchill Downs’ stock experienced a significant decline. Additionally, the company revised its 2025 capital spending projections, reducing both maintenance and project capital estimates. The company’s leadership emphasized their adaptability and commitment to long-term growth, particularly in the Kentucky Derby and regional gaming markets.
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