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TheStreet Open House

Pinnacle Entertainment (PNK) Gains Despite Earnings Miss

NEW YORK (TheStreet) -- Pinnacle Entertainment (PNK) was gaining 5.7% to $23.88 on Wednesday despite earnings that missed analysts' estimates.

For the fourth quarter, Pinnacle reported earnings of 31 cents a share, missing the Capital IQ Consensus Estimate of 36 cents. Revenue for the casino company rose 77.4% to $535 million, in-line with analysts' forecasts of $538.7 million. Adjusted earnings for the year-earlier quarter were 7 cents a share.

In the Midwest segment, fourth-quarter revenue increased 231.1% to $282.1 million, Pinnacle said. In the South segment, revenue increased by 17.2% to $198.3 million.

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TheStreet Ratings team rates PINNACLE ENTERTAINMENT INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about its recommendation:

"We rate PINNACLE ENTERTAINMENT INC (PNK) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • PNK's very impressive revenue growth greatly exceeded the industry average of 3.8%. Since the same quarter one year prior, revenues leaped by 63.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, PNK's share price has jumped by 38.62%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • 43.94% is the gross profit margin for PINNACLE ENTERTAINMENT INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -43.06% is in-line with the industry average.
  • The debt-to-equity ratio is very high at 23.23 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, PNK has a quick ratio of 0.52, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, PINNACLE ENTERTAINMENT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: PNK Ratings Report

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