Boyd Gaming Corporation a Casino Favorite
Nevada and Las Vegas may be reporting solid visitor and gaming revenue growth, but that hasn’t translated into strong growth in the overall casino gaming industry. In fact, when you consider all of the major billion-dollar players in this sector, the only standout is one-time penny stock Boyd Gaming Corporation (NYSE:BYD). The company is reporting solid earnings, revising its estimates upwards, and has excellent momentum, which could mean big profits for owners of BYD stock.
Compared to Las Vegas stalwarts like Caesars Entertainment Corporation (NYSE:CZR), MGM Resorts International (NYSE:MGM), Las Vegas Sands Corp. (NYSE:LVS) and Wynn Resorts Ltd. (NASDAQ:WYNN), Boyd is the only casino stock worth betting on.
Is Boyd Gaming Corporation a Winner?
Despite improving metrics, the casino gaming industry in the U.S. has not been performing well. Most of the major players either in the red or barely up for the year; Caesars Entertainment is down 43% year-to-date at $8.85: Wynn Resorts has fallen 49.5% to $73.59, Las Vegas Sands has retreated 11.3%, and MGM Resorts is up a princely 1.2%. Boyd Gaming, on the other hand, is up 61% year-to-date and 77% year-over-year.
Chart courtesy of www.StockCharts.com
Not surprisingly, the Dow Jones U.S. Gambling Index is down 19% year-to-date and 23.5% year-over-year at 614.45. The Market Vectors Gaming ETF (NYSEArca:BJK) is down roughly 12% year-to-date and 17.6% year-over-year at $33.75. Its top holdings include Las Vegas Sands Corp. at 7.92% of the fund, Sands China Ltd. at 7.86%, Galaxy Entertainment Group Ltd. at 7.51%, and Wynn Resorts Ltd. at 4.50%. Boyd Gaming is there, but only at 1.41% of the percentage of net assets. (Source: “Market Vectors Gaming ETF,” vaneck.com, November 6, 2015.)
Chart courtesy of www.StockCharts.com
Boyd Gaming Corporation is one of the country’s largest and most successful casino entertainment companies. The company owns and operates 22 gaming properties in eight states: Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, and New Jersey. This includes 50% of Atlantic City’s Borgata Hotel Casino & Spa. Most of the company’s properties are full-resort hotels that feature pools, full casinos, restaurants, shops, and on-site entertainment options for guests.
It has been a profitable formula for Boyd Gaming shareholders. The company has a market cap of $2.33 billion, Forward P/E of 21.31, and total cash of $125 million. Total debt stands at $3.34 billion. That said, Boyd has repaid approximately $220 million in debt so far this year, following $200 million in debt reduction in 2014. Thanks to these efforts, the company’s balance sheet is the strongest it has been since the recession.
On October 22, Boyd Gaming announced its financial results for the third quarter ended September 30, 2015. Third-quarter revenue was up 3.3% year-over-year at $546.3 million. Third-quarter net income was $25.4 million, or $0.22 per share. During the third quarter of 2014, the company reported a net loss of $15.1 million, or $0.14 per share. (Source: “Boyd Gaming Reports Third Quarter 2015 Results,” boydgaming.com, October 22, 2015.)
The prior-year third quarter included a pretax impairment charge of $12.1 million to adjust the value of the company’s equity ownership in Borgata, and a $6.2 million pretax impairment charge to write down certain non-operating assets to their estimated recoverable value.
Boyd Gaming President and CEO Keith Smith said, “The positive momentum that began late last year carried into the third quarter, as we continued to deliver strong growth in revenues and profitability. Additionally, our long-term strategic initiative to enhance amenities in key markets resulted in continued non-gaming revenue growth.”
Based on third-quarter results and continued positive trends in the business, Boyd Gaming is raising its previously provided guidance for the full year 2015. The company now projects adjusted EBITDA, including 50% of Borgata’s adjusted EBITDA, of $610 million to $620 million. Yet this might only be the beginning for Boyd Gaming and BYD stock.
Bigger is Not Better for Boyd Gaming
There are much bigger casino gaming companies out there, but right now, Boyd Gaming is one of the best. The company reported solid third-quarter results and a great outlook. And more and more analysts are getting bullish on BYD stock. Over the last month, fourth-quarter estimates have increased from $0.09 per share to $0.13 per share. (Source: Analyst Estimates, finance.yahoo.com, last accessed November 6, 2015.)
This year, analyst expectations have increased from $0.55 per share to $0.75. Next year, analysts forecast the company will report full-year EPS of $0.98.
From the slots on the floor up to the gilded corporate offices, casino gaming is extremely competitive. With the economy improving and Americans having more disposable income, BYD stock is emerging as one of the best stocks in the industry. While 2015 is shaping up to be a great year, 2016 could be even more lucrative for Boyd Gaming.