Boyd Gaming Experiences Slide Following Earnings Disappointment, Analysts Adjust Predicted Values
Wednesday saw a drop of over 11% in shares of Boyd Gaming (NYSE: BYD) following news that their third-quarter earnings per share didn't meet Wall Street expectations. The Orleans operator posted earnings of $1.36 per share on revenue of $903.16 million. Analysts were expecting earnings of $1.47 on revenues of $880.71. While the revenue surpassed expectations, the earnings miss left investors disgruntled and worried about the opening of Red Rock Resorts' (NASDAQ: RRR) Durango Casino & Resort in Southwest Las Vegas potentially diverting customers from Boyd's Las Vegas casinos.
As a result, several analysts lowered their price targets for Boyd, with Stifel's Steven Wieczynski maintaining a "buy" rating while reducing his price estimate to $78 from $83.
"This could actually be a clearing event as expectations will finally get reset and estimates should move lower," wrote Wieczynski in a note to clients. "We continue to believe the majority of stocks under our coverage will never work until estimates get reset to a level in which investors feel comfortable that those revised estimates are achievable under any softer macro backdrop."
Boyd Gaming runs 28 gaming venues in ten states.
Possible Sign of Regional Struggles
As the first of the major regional casino operators to release their third-quarter results, Boyd's weaker-than-expected earnings have raised concerns in the investing community about potential challenges for the sector. There are whispers that Boyd's disappointing performance could be an omen of dark times ahead.
This concern isn't farfetched, as some regional gaming markets are already showing signs of stress. While Las Vegas and Macau are generally performing well, macroeconomic headwinds still cast a shadow over several regional casino stocks. Consumers, especially those in markets outside of Las Vegas, are feeling the pinch of inflation and rising interest rates, which could hamper operators like Boyd.
However, Boyd could be one of the more resilient regional casino operators if investors can be convinced to adjust their expectations.
"We aren't sure when/if the consumer will materially crack, based on the current macro backdrop and the potential for a recession to arise. We believe being as cautious as possible with our forward-looking projections is the most prudent approach at this point," said Wieczynski. "BYD's forward comments remain generally positive, with them indicating that their core clientele has yet to slow down through September."
Boyd's Defenses
Despite the potential for a less-than-favorable economic climate, Boyd Gaming has avenues to protect itself.
At the end of the third quarter, the operator had $269.2 million in cash on hand and remains committed to both repurchasing its stock and maintaining its dividend program.
"Beyond a commitment to improved operating efficiency, we anticipate management to continue prioritizing returning excess capital to shareholders," concluded Wieczynski. "We also remain optimistic about BYD's significant real estate ownership, which can serve as a buffer in challenging times and offers opportunities for strategic value creation in the long run."
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Source: www.casino.org
