Churchill Downs Announces 2-For-1 Stock Split

Churchill Downs Incorporated (NASDAQ: CHDN) has declared that it will be executing a two-for-one split of its stock.

Rich Strike won the 2022 Kentucky Derby at Churchill Downs, with Epicenter coming in a close second. On the same day, Churchill Downs announced it would be splitting its stock via a 2-for-1 stock split. Shareholders of record as of May 5 will receive an extra share of the company’s stock for each share they own. It is expected the split-adjusted stock will begin trading at the new price on May 22, 2023. The split will be the first for Churchill Downs since April 1998. The company closed today at $253.85, meaning that with the 2-for-1 split, the new price would be $126.92. Many investors are speculating about how the stock split will affect Churchill Downs in the future.

Speculating About Churchill Downs Stock Split

Churchill Downs, the operator of its namesake race track and the host of renowned horse races including the Kentucky Derby, announced that they will be splitting their stock but failed to provide a reason for this decision. Companies with high share prices often undergo forward stock splits to widen the demand from a variety of retail investors. This method has been used by leading companies such as Alphabet, Amazon and Tesla. As of today’s market closing, Churchill Downs is the only stock in the gaming/wagering and leisure industry to be trading in triple-digits, a status which will be kept post-split. It is important to note that stock splits do not change a company’s market capitalization, meaning investors’ stakes are not altered in any way.

As evidenced by such a move, Churchill Downs has exhibited strong commitment to its shareholders by announcing a split-adjusted $500 million buyback program prior to its earnings release in September 2021. This decision comes alongside an impressive 40%+ increase in its annual dividend since 2010. With the split, investors now reap the same rewards by either owning 100 shares at $254 per share, or 200 at half the cost of $127.

Split Decision Comes Ahead of Earnings Release

Prior to its earnings update due Wednesday after the close of America’s markets, Churchill Downs announced a stock split. Analysts are predicting the racetrack operator will report EPS of $1.81 and revenue of $536.57 million, meaning an increase of 67.6% and 47.4% since the last announcement. Whereas in the past 90 days, three analysts have cut down EPS forecasts but none raised them, four analysts have lifted their sales projections over the same time frame. Churchill Downs has outperformed EPS estimates in 50% of the last 8 cycles, and beaten revenue forecasts almost two-thirds of the time.