- Bad run of sports results impact US profit
- Full year US profit lowered by a third
- Long term guidance intact
Online sports betting and iGaming group Flutter Entertainment (FLTR) said a run of customer friendly results in the NFL (National Football League) during November and December will impact full year US profit by around a third.
The shares fell 3% after hours in the US while the UK shares dropped 2.6% to £199.90 today (8 Jan). The fall had a knock-on effect on Ladbrokes and Coral owner Entain (ENT) with the shares falling 1.7% to 685.8p.
Entain operates in the US via its 50/50 joint venture with MGM Resorts International (MGM:NYSE) and the BetMGM brand. In the US, fantasy sports betting peer DraftKings (DKNG:NASDAQ) fell 1.5% in the aftermarket.
DOWNGRADE TO 2024 US GUIDANCE
The company noted that the current 2024/25 NFL season to date (the regular season runs between 5 September 2024 and 5 January 2025) has seen the highest rate of favourites winning in nearly 20-years.
Favourites are favourites because more punters bet on them which means the bookies pay out to a lot more punters, reducing the revenue and profit of the bookmaker.
This effect means Flutter’s 2024 US revenue is now estimated to approximately $5.78 billion at the midpoint of the range, from $6.15 billion with adjusted EBITDA (earnings before interest, taxes, depreciation, and amortisation) estimated to be around $205 million lower than prior guidance to $505 million at the midpoint.
The company insisted that the transitory nature of the results has no impact on the underlying assumptions and guidance expectations given at the investor day on 25 September 2024.
These call for a three-year compound annual growth rate in revenue of between 15% and 17% to approximately $9.7 billion at the midpoint and an adjusted EBITDA margin expansion of 13 percentage points to approximately 25% by 2027.
Reflecting the unreliable nature of sports betting, Flutter experienced favourable better results in the English Premier league which mean revenue and adjusted EBITDA is now expected to be approximately 1% and 2% higher than prior guidance provided in the third quarter.
ANALYST VIEW
Paul Leyland at gambling consultancy RP Financial Updates commented: ‘After nearly four years of structural margin improvements, a brief run of bad luck was almost inevitable and Flutter is largely right to confirm underlying guidance, in our view.
‘However, the problem with Black Swans, both in ornithology and in risk metaphor, is that they are not as rare as people think.
‘Fanduel’s leading (dominant) same game parlay mix probably exposes them more to this run of bad results for bookmakers (note when DraftKings warned it had a far more muted result on FD), but we doubt Fanduel will be the only US betting revenue disappointment / profit warning.’
