Boyd Gaming Price Targets Cut After Q3 EPS Miss

Posted on: October 25, 2023, 03:35h. 

Last updated on: October 25, 2023, 04:49h.

Shares of Boyd Gaming (NYSE: BYD) slumped more than 11% Wednesday, a day after the regional casino operator reported third-quarter earnings per share that missed Wall Street estimates.

Late Tuesday, the Orleans operator said earned $1.36 a share on revenue of $903.16 million. Analysts expected earnings of $1.47 on sales of $880.71. While the revenue beat was impressive, analysts and investors were frustrated by the earnings miss and concerned about commentary from management that the November debut of Red Rock Resorts’ (NASDAQ: RRR) Durango Casino & Resort in Southwest Las Vegas could siphon business from Boyd’s Las Vegas locals casinos.

As a result, at least six analysts reduced price targets on the Aliante operator, one of whom was Stifel’s Steven Wieczynski. In a new report to clients, he reiterated a “buy” rating on Boyd shares while trimming his price forecast to $78 from $83.

We believe this could actually be a clearing event as expectations will finally get reset and estimates should move lower,” wrote Wieczynski. “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.”

Las Vegas-based Boyd runs 28 gaming venues in 10 states.

Boyd Gaming Report Could Be Sign of Regional Weakness

Boyd is the first of the major regional casino operators to deliver third-quarter results, and there are concerns in the investment community that the weak earning print could be a harbinger of gloomy things to come for the segment.

Those worries aren’t hyperbole because some regional gaming markets are already showing signs of strain. While there’s little evidence of economic contraction on the Las Vegas Strip, and Macau is rebounding in earnest, macroeconomic headwinds linger for regional casino stocks.

“While we aren’t sure when/if the consumer will materially crack, based on the current macro backdrop and the potential for a recession to rear its head, we believe being as cautious as possible with our forward thinking is most prudent at this point. BYD’s forward commentary remains mostly encouraging, with them indicating that their core customer hasn’t slowed at all through September,” added Wieczynski.

Boyd Has Buffers

While the current macroeconomic environment isn’t inviting for some regional casino markets, Boyd has avenues for buffering against an economic slump.

At the end of the third quarter, the operator had cash on hand of $269.2 million and remains committed to repurchasing its own stock and its dividend program.

“In addition to a commitment to improved operating efficiency, we expect management to remain equally committed to returning excess capital to shareholders,” concluded Wieczynski. “We also continue to hang our hat on BYD’s significant real estate ownership, which helps to support the valuation in the worst of times while presenting an avenue for strategic value creation over the longer term.”