With The Lottery Corporation Ltd (ASX: TLC) set to release its results mid-next month, the team at Jarden has run the ruler over their expected performance and concluded that the company will come out with steady (but unremarkable) numbers.
That also seems to be the consensus across a broader survey of analysts, with Tradingview saying that based on 11 analysts recomendations, the consensus is for a neutral recommendation.
According to Jarden there is some mild upside left in the stock, although their target price of $5.30 was only just above the price at publication of their research note of $5.11.
Factoring in dividends, this would return 7% to investors if that share price target was achieved.
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No luck from jackpots
The Jarden team said they were estimating first half lotteries turnover of about $3.2 billion, down 2% year on year for the first half, primarily due to fewer jackpots accruing in the half.
They went on to say this re the expected revenue result:
In our view, this is due to unfavourable jackpot sequences (Powerball/Oz Lotto aggregate jackpots -14% y/y), rather than underlying demand weakness. We estimate like-for-like draws have performed robustly through the period. First half FY26 turnover is also likely impacted by Saturday Lotto's annual year-end draw falling in calendar year 2026.
Jarden said they expected the company to "look through" the jackpot weakness and declare a dividend of 8.5 cents per share, in line with the corresponding first half in the previous year.
The Jarden team also said that while there was a risk to earnings, this had likely been factored in.
While we see risk to consensus earnings, recent share price performance would suggest likely downgrades are more than reflected in market expectations given the high degree of visibility on jackpot activity. Consensus FY26 earnings per share downgrades since 1-Sep have been about 5% with Jarden estimates about 7% lower. Despite this, we now view current levels as already pricing in below theoretical jackpot activity near-term. With the stock trading on about 25x FY27 P/E (assuming normalised jackpot sequences), and at the low end of historical trade ranges, we now see positive risk/reward and upgrade our rating to Overweight (from Underweight).
Jarden said they saw the business as well-managed and cash-generative, "within an economically resilient, exclusive licensed market''.
Opportunities for structural earnings growth under new CEO Wayne Pickup will likely include digital penetration, cost and Victorian licence-related opportunities.
The Lottery Corporation was valued at $11.37 billion at the close of trade on Wednesday.
