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Luxury casino and resort operator Monarch (NASDAQ:MCRI) reported Q2 CY2024 results topping analysts' expectations, with revenue up 3.6% year on year to $128.1 million. It made a GAAP profit of $1.19 per share, improving from its profit of $1.14 per share in the same quarter last year.
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Monarch (MCRI) Q2 CY2024 Highlights:
- Revenue: $128.1 million vs analyst estimates of $126.3 million (1.5% beat)
- EPS: $1.19 vs analyst estimates of $1.11 (7.4% beat)
- Gross Margin (GAAP): 53.3%, in line with the same quarter last year
- Market Capitalization: $1.31 billion
Casino OperatorCasino operators enjoy limited competition because gambling is a highly regulated industry. These companies can also enjoy healthy margins and profits. Have you ever heard the phrase ‘the house always wins’? Regulation cuts both ways, however, and casinos may face stroke-of-the-pen risk that suddenly limits what they can or can't do and where they can do it. Furthermore, digitization is changing the game, pun intended. Whether it’s online poker or sports betting on your smartphone, innovation is forcing these players to adapt to changing consumer preferences, such as being able to wager anywhere on demand.
Sales GrowthReviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one tends to sustain growth for years. Thankfully, Monarch's 15.8% annualized revenue growth over the last five years was decent. This shows it was successful in expanding, a useful starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or emerging trend. Monarch's recent history shows its demand slowed as its annualized revenue growth of 7% over the last two years is below its five-year trend. Note that COVID hurt Monarch's business in 2020 and part of 2021, and it bounced back in a big way thereafter.
This quarter, Monarch reported reasonable year-on-year revenue growth of 3.6%, and its $128.1 million of revenue topped Wall Street's estimates by 1.5%. Looking ahead, Wall Street expects sales to grow 1.6% over the next 12 months, a deceleration from this quarter.
Operating MarginRead More Operating margin is an important measure of profitability. It’s the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. Operating margin is also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Monarch has been a well-oiled machine over the last two years. It demonstrated elite profitability for a consumer discretionary business, boasting an average operating margin of 22.7%.
In Q2, Monarch generated an operating profit margin of 23%, in line with the same quarter last year. This indicates the company's overall cost structure has been relatively stable.
Key Takeaways from Monarch's Q2 ResultsIt was good to see Monarch beat analysts' EPS expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street's estimates. Overall, this quarter seemed fairly positive and shareholders should feel optimistic. The stock remained flat at $68.78 immediately following the results.
