Paddy Power Betfair - The Boomerang effect: upgrading forecasts by 7% to reflect the better-than-expected Australian turnaround

Davy Research
/Read Important Disclosures

We are increasing our earnings forecasts for Paddy Power Betfair by 3% for 2017 and 7% for 2018 following publication of full-year results and our latest assessment of the outlook for the business. The upgrade is being driven by the speed and magnitude of the turnaround in Australia, with the H2 performance there exceeding expectations both at the top line and on the efficiency front.

The scale of upgrade is partially offset by our decision to take a more cautious stance on our European online growth forecasts; we now assume, for example, no growth in gaming revenues this year. We believe this assumption builds a decent margin of safety into our numbers.

Our revised forecasts leave us 4% above EPS consensus for this year and 2% above for 2018. We identify a number of areas where we believe our assumptions may ultimately prove to be overly cautious and, as such, see on-going scope for further upgrades over time.