Tabcorp earnings preview: 3 things to consider ahead of FY19 results

Tabcorp share price: analyst expectations

Tabcorp Holdings Ltd is expected to announce its 2019 full-year results next Wednesday, August 14.

Ahead of these results, analysts remain mixed on the gambling giant’s future prospects.

According to the Wall Street Journal, of the 12 analysts covering the stock, only two rate it as a buy. Overall and ahead of Tabcorp’s earnings, the stock has a consensus hold rating.

Tabcorp’s share price has been a similarly mixed performer year-to-date, rising just 3% in that period.

Digital growth in focus

A particular bright spot for Tabcorp in its half-year release was the demonstrated growth in its digital business segments.

Here, Tabcorp saw strong digital growth from the Lotteries and Kino segments, witnessing increases of 63.5% and 91.6%, respectively.

Adding to this digital focus, it was recently annouced that Sky Racing and Tabcorp have partnered together to launch a brand-new horse racing app: Sky Racing Active.

Speaking of the new app, Tabcorp’s Darren Pearce noted that:

‘Sky Racing and Tabcorp are thrilled to be launching this new product that allows our customers to shape their racing experience; it really gives the customer the power to play producer – creating channels specifically around their preferences. What they want to watch, when they want to watch it.’

The Sydney Morning Herald went as far as to describe this app as the ‘Netflix for racing streaming.’

Investors will likely be keen to see continued growth from the company’s multi-faceted digital initiatives, when Tabcorp reports its full-year results next week

Key financials to watch

Though Tabcorp’s share price has floundered since January, the company has delivered consistent top-line growth in the last few years.

Centrally, the company has almost doubled its revenue in the last five years, rising from around A$2.0 billion in FY14 to A$3.8 billion in FY2018.

Mind you, in that same five-year period, Tabcorp has struggled with profitability.

In FY15 for example, Tabcorp Holdings Ltd reported impressive profits of A$334 million.

By comparison, in FY17 the company reported a loss of A$20 million; and though the company rebounded in FY18, with profits of A$28 million – this was still a far cry from Tabcorp’s performance in the years prior.

The company now looks to be making strong progress towards turning around its profitability. In the first half of the year and after expenses, Tabcorp reported earnings of A$182 million – well above the prior year's first-half results.

The question then remains, can Tabcorp maintain this stellar momentum when it reports its 2019 full-year results next week, or will it faulter?

A quick glance of Tabcorp’s price to earnings ratio – taken as a general gauge for investor growth expectations – indicates that investors are indeed expecting big things from the gambling giant.