Lottery Corp Earnings: Tracking a Much Stronger Second Half After Slow Start to Fiscal 2024

Households are clearly under budget pressure and cutting back on lottery tickets, which is typically a resilient product for wide-moat Lottery Corp. An unfavorable sequence of Powerball jackpots didn’t help, and both revenue and underlying EBITDA from the core lottery segment, which accounts for around 86% of earnings, fell 2% on the previous corresponding period, or PCP. Partially offsetting was the AUD 90 million Oz Lotto draw toward the end of the half, with the game finally generating the larger jackpots expected since the May 2022 redesign. But Lottery Corp’s fortunes changed in the early weeks of the second half. The record AUD 200 million Powerball lottery, drawn on Feb. 1, 2024, has improved volumes dramatically—particularly against a soft PCP. Despite the soft start to fiscal 2024, we raise our group revenue forecast by 5% to AUD 3.8 billion, which lifts fiscal 2024 forecast earnings per share by 6% to AUD 0.16. Revenue and earnings forecasts from fiscal 2025 remain broadly intact. Shares trade at a modest premium to our unchanged AUD 5.00 per share fair value estimate.