Research · Sep 3, 2026
[CHDN] Churchill Downs Thesis 2026: Kentucky Derby Premiumization Plus Historical Racing Expansion
Churchill Downs Incorporated (NASDAQ: CHDN) is a US racing, gaming and online-wagering company — home of the Kentucky Derby — with roots to 1875 (Churchill Downs Racetrack and the first Kentucky Derby), NASDAQ-listed since 1993, headquartered in Louisville Kentucky. CHDN enters FY2026 with FY2025 revenue ~$2.7-3.0B (+5-12% YoY off ~$2.74B FY2024) and adj. EPS ~$7.50-9.50, reflecting ~$1.0-1.2B aggregate Live & Historical Racing revenue + ~$0.9-1.1B aggregate Gaming revenue + ~$0.5-0.65B aggregate Wagering Services & Solutions (TwinSpires) revenue, all under CEO Bill Carstanjen (CEO since ~2014, ~11-12 year tenure, ~20+ year Churchill Downs career in legal and COO roles, architect of the Derby premiumization capex, the historical horse racing (HRM) expansion, the TwinSpires online-wagering platform, the regional-casino portfolio and the leverage-funded growth strategy). The first thesis pillar is the Live & Historical Racing (Kentucky Derby + HRM Venues) pipeline (~$1.0-1.2B revenue, ~36-42% revenue mix): the Kentucky Derby — a unique, ~150-year, highest-margin event franchise (tickets, hospitality, sponsorship, media rights and Derby-weekend wagering, plus the Oaks and Derby Week) with the multi-year ~$0.5-1.0B+ track-renovation/premiumization capex (new paddock, grandstand, courtyard and premium clubs) driving pricing power and incremental high-margin revenue — plus the broader Churchill Downs racing meets, and a growing fleet of historical horse racing (HRM) venues (Derby City Gaming Louisville and Downtown, Oak Grove, Newport, The Mint Gaming Halls in Kentucky, Virginia's Colonial Downs/Rosie's via the 2022 Peninsula Pacific acquisition, and New Hampshire), with new venues (Owensboro, Calder/Florida) ramping at a ~30-45%+ HRM/Live-Racing adj. EBITDA margin; FY2026 catalyst is ~$1.1-1.4B Live & Historical Racing revenue (+8-18%). The second pillar is the Gaming (Regional Casinos) + TwinSpires Online Wagering pipeline (~$1.4-1.7B revenue, ~58-64% revenue mix): regional casinos owned and via JV — Rivers Casino Des Plaines (a high-value Chicago-area JV near O'Hare), plus Mississippi (Riverwalk, Harlow's), Louisiana (Fair Grounds plus OTBs and slots), Maine (Oxford), Pennsylvania (Lady Luck Nemacolin), Florida (Calder, being rebuilt) and the new Terre Haute Indiana casino, at ~30-40%+ Gaming adj. EBITDA margin — plus TwinSpires, one of the largest US horse-race advance-deposit-wagering (ADW) platforms (the company exited the FanDuel sports-betting JV, selling the stake, to refocus on horse racing and HRM tech), and B2B totalizator/technology (United Tote tote systems, Exacta Systems HRM machine/system supply — a high-margin recurring stream riding industry HRM expansion); FY2026 catalyst is ~$1.5-1.9B combined revenue with the Rivers Des Plaines JV, new-casino ramps, TwinSpires handle growth and Exacta B2B HRM-tech growth. The capital story: a ~$0.40-0.46 aggregate annual dividend per share (~0.3-0.6% yield; annual; low payout — growth-reinvestment priority) with a ~50+ consecutive-year increase streak (a Dividend King-class payer), significant buybacks (~$0.2-0.6B annual; the share count has fallen materially over the years), ~$5-7B net debt (term loans and bonds funding HRM expansion, Derby track-renovation capex and acquisitions), ~3.5-4.5x net debt/EBITDA (elevated but supported by stable cash flows on a deleveraging path as growth projects ramp into EBITDA and capex moderates), a BB/Ba2 to BB+/Ba1 non-investment-grade credit profile, ~71-74M diluted shares and ~$0.5-1.0B liquidity. At ~$95-150 per share on ~71-74M shares (~$7-11B equity, ~$12-18B EV) CHDN trades at ~18-28x P/E, ~10-15x EV/EBITDA and ~3-5x P/Sales versus gaming/racing/online-wagering peers Penn Entertainment, Boyd Gaming, Caesars Entertainment, Bally's, Golden Entertainment, Full House Resorts, Red Rock Resorts, Light & Wonder (Exacta/HRM-tech comp) and Flutter (TwinSpires/ADW comp). FY2026 base case is ~$2.9-3.3B revenue + ~$8.50-11.00 adj. EPS + ~$1.4-1.7B adj. EBITDA + ~3.0-4.5x net debt/EBITDA; bull case ~$3.1-3.6B revenue + ~$11.00-15.00 adj. EPS on Derby premiumization pricing power, the track-renovation capex unlocking high-margin revenue, HRM new-venue ramps, the Rivers Des Plaines JV and new casinos, TwinSpires handle and Exacta B2B HRM-tech growth, deleveraging and buybacks; bear case ~$2.7-2.9B revenue + ~$6.50-8.50 adj. EPS on regional gaming-supply competition, HRM regulatory/legal challenges (the key risk — Kentucky/Virginia HRM legality litigation and state expansion blocks), Derby one-day-event/weather concentration, a track-renovation capex ROI shortfall, consumer-discretionary-spending weakness, the horse-racing industry's secular decline (foal crop and handle), Rivers Des Plaines Illinois-gaming-tax/competition, new-casino execution and permitting, and leverage/non-investment-grade-credit constraints (~4.5x+ net debt/EBITDA). The thesis depends on the Live & Historical Racing (Kentucky Derby + HRM Venues) pipeline plus the Gaming (Regional Casinos) + TwinSpires Online Wagering pipeline plus the unique Derby franchise plus the Derby premiumization capex plus HRM expansion plus the Rivers Des Plaines JV plus TwinSpires/Exacta plus the ~50+ year dividend-increase streak plus the deleveraging path and Bill Carstanjen's Derby premiumization and HRM expansion execution.