Churchill Downs delivered a positive third quarter, with results above Wall Street’s expectations and the stock rising significantly after earnings. Management attributed the quarter’s outperformance to record revenue and adjusted EBITDA in both its Live and Historical Racing and Wagering Services & Solutions segments. CEO William Carstanjen highlighted the strong performance of regional gaming properties, noting growth from both high-end and unrated guests. The company’s focus on premium ticketing experiences, successful property investments, and consistent execution across its operations contributed to these results. Carstanjen emphasized, “We have a portfolio of unique and high-performing assets that collectively provide multiple catalysts for growth and free cash flow generation for years to come.”
Is now the time to buy CHDN? Find out in our full research report (it’s free for active Edge members).
Churchill Downs (CHDN) Q3 CY2025 Highlights:
- Revenue: $683 million vs analyst estimates of $674.7 million (8.7% year-on-year growth, 1.2% beat)
- Adjusted EPS: $1.09 vs analyst estimates of $0.98 (10.9% beat)
- Adjusted EBITDA: $262.3 million vs analyst estimates of $245.8 million (38.4% margin, 6.7% beat)
- Operating Margin: 14.3%, down from 20% in the same quarter last year
- Market Capitalization: $6.94 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 From Churchill Downs’s Q3 Earnings Call
- Barry Jonas (Truist Securities) asked about return targets and lessons from premium seating upgrades. CEO William Carstanjen confirmed a 20% unlevered IRR target for Victory Run, emphasizing a three-year ramp for returns.
- David Katz (Jefferies) sought clarification on the potential for electronic table games (ETGs). Carstanjen said ETGs are a major focus but depend on regulatory approval, adding, “It’s a technology journey and it’s also a regulatory journey.”
- Chad Beynon (Macquarie) questioned capital allocation priorities amid increased project spending. CFO Marcia Dall reaffirmed commitment to reducing leverage below 4x while balancing share repurchases and dividend growth.
- Daniel Guglielmo (Capital One Securities) asked about the benefits of owning properties outright. Carstanjen stated that full ownership provides stability and predictability, though he believes the market does not fully credit this in the company’s valuation.
- Shaun Kelley (Bank of America) probed the impact of emerging prediction markets on Derby wagering. Carstanjen explained Churchill Downs is governed by federal law, differentiating it from state-level sports betting, and has no current deals with prediction market operators.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) the ramp-up and guest feedback from new and renovated Derby Week premium seating, including the Victory Run project; (2) progress on HRM venue openings in Kentucky, Virginia, and New Hampshire, along with Exacta’s expansion into new markets; and (3) sustained margin performance amid competitive pressures and regulatory developments, particularly in electronic table games and enforcement against illegal gaming. Execution on these milestones will be critical to sustained growth.
Churchill Downs currently trades at $98.89, up from $96.49 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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