- 2024 profit upgraded to top of range
- Firm dodges US client friendly results
- MGM trading update on 4 February
Ladbrokes and Coral owner Entain (ENT) topped the FTSE 100 gainers on Monday (13 January), advancing nearly 5% after the sports betting and gaming company nudged up group full-year profit expectations to the top of end of the guided range.
The share price reaction also reflected a sense of relief that Entain was not impacted in the US to the same extent as gambling peer Flutter Entertainment (FLTR), which issued a profit warning (8 Jan) attributed to unfavourable sports betting results.
Entain said that despite customer friendly US sports results seen in October and December, its joint venture partner BetMGM reaffirms prior EBITDA (earnings before interest, tax, depreciation, and amortisation) guidance of a $250 million loss.
While dodging the worst of client friendly results in the US, just like Flutter, Entain benefitted from favourable results in the UK Premier League in the fourth quarter.
Consequently, the company now expects group EBITDA (earnings before interest, tax, depreciation and amortisation) to be at the top of the £1.04 billion to £1.09 billion range.
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Shore Capital’s Greg Johnson explained that the mix of MGM’s business with higher casino and similar or lower parlay exposure is likely to have shielded the business from the well-flagged unfavourable sports betting results.
Johnson believes the timing of today’s statement is likely to have been in response to the share price weakness. He said he is likely to nudge up his 2024 EBITDA forecast by £10 million, but leaves his 2025 estimates unchanged at this stage.
Jefferies commented: ‘We await the new CEO’s formal update on 6 March with the final results, including an update on strategic direction and operating initiatives which could have the scope to move numbers and the valuation multiple.’
Russ Mould, investment director at AJ Bell, said: ‘Rather than deliver the bad news investors had expected, Entain also said its group earnings would be at the top of previous guidance. That took the market by surprise and triggered a surge in the share price.
‘Entain might have scored the winning goal in recent months, but its share price has more than halved since 2021 which implies something drastic needs to be done to revive its fortunes and win back the market’s favour. Today’s trading update is a good start, but the market will need more good news rather than a stroke of luck’.
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author (Martin Gamble) and the editor (James Crux) own shares in AJ Bell.
