Churchill Downs’ first quarter results were met with a significant negative market reaction, despite the company achieving record revenue and adjusted EBITDA. Management attributed the performance to strong contributions from new venues, such as the Owensboro HRM facility, and resilience from core Kentucky properties. However, CEO Bill Carstanjen acknowledged that macroeconomic factors—including weather disruptions, increased tariffs, and consumer hesitancy—impacted certain segments, leading to softness primarily among lower-tier and unrated players. Carstanjen noted, “We see some hesitancy with just the volatility in the macroeconomic environment and the uncertainty over tariffs and things like that. It’s most evident in our lower-tiered or unrated play.”
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Churchill Downs (CHDN) Q1 CY2025 Highlights:
- Revenue: $642.6 million vs analyst estimates of $644.6 million (8.7% year-on-year growth, in line)
- Adjusted EPS: $1.07 vs analyst estimates of $1.04 (2.5% beat)
- Adjusted EBITDA: $245.1 million vs analyst estimates of $245.5 million (38.1% margin, in line)
- Operating Margin: 20.9%, in line with the same quarter last year
- Market Capitalization: $7.15 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Churchill Downs’s Q1 Earnings Call
- Chad Beynon (Macquarie): asked about softness among lower-tier players and whether this trend was accelerating; CEO Bill Carstanjen replied that hesitancy remained consistent, attributing it to macroeconomic uncertainty and tariffs, especially among unrated play.
- Barry Jonas (Truist): inquired about international Derby attendance and event strength; Carstanjen confirmed no material decline in international visitation and reiterated strong demand overall, though noted softer demand for lowest-tier tickets.
- David Katz (Jefferies): sought clarity on long-term Derby earnings growth with project delays; Carstanjen highlighted the NBC contract, ongoing pricing power, and a strategy focused on developing and pricing new premium experiences as the macro environment stabilizes.
- Jordan Bender (Citizens): asked about the rollout and regulatory challenges of electronic table games; Carstanjen described the process as gradual and dependent on regulatory and tax clarity, but viewed it as a long-term growth driver.
- Ben Chaiken (Mizuho): questioned capital allocation priorities following the project pause; Carstanjen said buybacks remain an option but emphasized disciplined evaluation of all investments as the market evolves.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be closely watching (1) the pace of customer ramp-up and profitability at new HRM venues, especially in Virginia, (2) progress on regulatory approvals and adoption of electronic table games, and (3) the resumption or re-scoping of large capital projects as inflation and tariff conditions stabilize. The evolution of consumer behavior and effectiveness of targeted marketing efforts will also be key signposts.
Churchill Downs currently trades at $98.92, down from $105.14 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).
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