While the Kentucky Derby had a photo finish, there was no doubt about the record handle and earnings from the 150th version of the race at Churchill Downs on Saturday, according to gaming analyst David Katz with Jefferies Equity Research.
The records shouldn’t come as a surprise and were in line with forecasts, Katz said in a note to investors on Sunday in talking about Churchill Downs’s stock.
“The result supports two aspects of our thesis on the stock,” Katz wrote. “First, it demonstrated CHDN’s ability to execute and grow the iconic asset. Second, the capital-investment execution broadly is positive given the growth plans. We expect a neutral to modestly positive reaction in the shares.”
Katz said wagering from all sources on Derby Day was up 11% to a new record high of $320.5 million, ahead of last year’s record of $288.7 million. All sources on handle for Derby week rose 8.4% to a new record of $446.6 million versus $412 million in 2023. Finally, TwinSpires’s handle on Churchill Downs races for the Kentucky Derby Day program was $92.1 million, up 22% versus $75.5 million in 2023.
EBITDA is expected to be up $26 million to $28 million versus 2023, which implies second-quarter EBITDA growth in line with their recent forecast, which is up $27.3 million year over year, Katz said. Jefferies’s EBITDA forecast for the Derby is estimated based on the communicated growth amounts, but is not formally disclosed, Katz said.
Their forecast for the live and historical segment in total (including HRM operations) is $252 million versus consensus of $260 million, which includes their quarterly forecast for Churchill Downs Racetrack of $153 million, he wrote.
“We expect that the year-over-year growth was driven by normal trends in consumer demand, ticket price increases, the all-new $200 million paddock with two new luxury reserved seating areas, and the continued ramp in year two of the Turn One expansion,” Katz said. “Our take on the paddock project is that it is a positive allocation of capital for the asset, as it continues to increase the experience and revenue-generating opportunities from the 157,000-plus attendees.”
