Key Takeaways
- Flutter Entertainment (NASDAQ: FLUT) missed Wall Street’s revenue expectations in Q3 CY2025, with sales rising 16.8% year on year to $3.79 billion.
- The company’s GAAP loss of $3.92 per share was significantly below analysts’ consensus estimates.
- Adjusted EBITDA was $478 million, beating analyst estimates of $353.9 million.
- Operating margin was -22%, down from 3% in the same quarter last year.
- Wall Street analysts expect revenue to grow 20.7% over the next 12 months, implying better top-line performance.
Introduction to Flutter Entertainment
Flutter Entertainment (NASDAQ: FLUT) is a global online betting powerhouse with a portfolio of leading online sports betting and gaming brands, including FanDuel, PokerStars, Paddy Power, and Sky Betting & Gaming. The company has its digital fingerprints on nearly every aspect of global gambling, from the Super Bowl bettor to the online poker aficionado. With a market capitalization of $38.05 billion, Flutter Entertainment is a significant player in the consumer discretionary sector.
Revenue Growth and Performance
A company’s long-term sales performance can indicate its overall quality. Flutter Entertainment grew its sales at a 29.3% compounded annual growth rate over the last five years, which is acceptable on an absolute basis but slightly short of the standards for the consumer discretionary sector. The company’s recent performance shows that its demand has slowed, with annualized revenue growth of 16.8% over the last two years being below its five-year trend. However, this quarter, Flutter Entertainment’s revenue grew by 16.8% year on year to $3.79 billion, although it fell short of Wall Street’s estimates. Looking ahead, sell-side analysts expect revenue to grow 20.7% over the next 12 months, which is a healthy projection for a company of its scale.
Operating Margin and Profitability
Operating margin is a key measure of profitability, and Flutter Entertainment’s operating margin has generally stayed the same over the last 12 months. However, the company broke even over the last two years, which is inadequate for a consumer discretionary business. This quarter, Flutter Entertainment generated an operating margin profit margin of negative 22%, down 25 percentage points year on year. This contraction shows that the company was less efficient because its expenses grew faster than its revenue. The company’s large expense base and inefficient cost structure were the main culprits behind this performance.
Earnings Per Share and Long-Term Profitability
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth. Although Flutter Entertainment’s full-year earnings are still negative, it reduced its losses and improved its EPS by 14% annually over the last four years. The next few quarters will be critical for assessing its long-term profitability. In Q3, Flutter Entertainment reported EPS of negative $3.92, down from negative $0.58 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street is optimistic, with analysts forecasting Flutter Entertainment’s full-year EPS of negative $1.31 to flip to positive $4.46.
Assessing the Investment Opportunity
We were impressed by how significantly Flutter Entertainment blew past analysts’ EBITDA expectations this quarter. We were also excited that its adjusted operating income outperformed Wall Street’s estimates by a wide margin. On the other hand, its EPS missed, and its revenue fell slightly short of Wall Street’s estimates. Overall, this print was mixed but still had some key positives. The stock remained flat at $215.95 immediately after reporting. Is Flutter Entertainment an attractive investment opportunity at the current price? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy.
Conclusion and Future Outlook
In conclusion, Flutter Entertainment’s Q3 results were mixed, with some positives and negatives. While the company’s revenue growth was impressive, its operating margin and EPS were disappointing. However, Wall Street analysts expect revenue to grow 20.7% over the next 12 months, which is a healthy projection for a company of its scale. To determine if Flutter Entertainment is an attractive investment opportunity, it’s essential to consider the company’s long-term business quality and valuation. By doing so, investors can make an informed decision about whether to buy or sell the stock.
