Boyd Gaming (NYSE:BYD) Exceeds Q3 Expectations
Gaming and hospitality company Boyd Gaming (NYSE:BYD) reported Q3 CY2024 results beating Wall Street’s revenue expectations, with sales up 6.4% year on year to $961.2 million. Its non-GAAP profit of $1.52 per share was also 8.7% above analysts’ consensus estimates.
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Boyd Gaming (BYD) Q3 CY2024 Highlights:
- Revenue: $961.2 million vs analyst estimates of $917.4 million (4.8% beat)
- Adjusted EPS: $1.52 vs analyst estimates of $1.40 (8.7% beat)
- EBITDA: $308.5 million vs analyst estimates of $287.3 million (7.4% beat)
- Gross Margin (GAAP): 53.2%, down from 63.2% in the same quarter last year
- Operating Margin: 22.9%, down from 24.1% in the same quarter last year
- EBITDA Margin: 32.1%, in line with the same quarter last year
- Market Capitalization: $5.87 billion
Keith Smith, President and Chief Executive Officer of Boyd Gaming, said: "Our Company continued to produce solid results in the third quarter, as underlying customer trends remained stable. During the quarter, we realized the benefits of our recent investments in our Downtown Las Vegas and Midwest & South segments. These investments produced strong returns, driving revenue and Adjusted EBITDAR gains in both segments. We also benefited from excellent performances in both our Online and Managed businesses, demonstrating the value of our diversified business model. We strengthened our growth pipeline, securing an opportunity to develop a best-in-market casino resort in Norfolk, Virginia, while continuing work on property enhancements nationwide. And we continued our commitment to returning capital to shareholders, repurchasing more than $200 million in shares during the quarter. In all, we are pleased with the ongoing performance of our business and remain focused on enhancing shareholder value."
Company Overview
Run by the Boyd family, Boyd Gaming (NYSE:BYD) is a diversified operator of gaming entertainment properties across the United States, offering casino games, hotel accommodations, and dining.
Casino Operator
Casino operators enjoy limited competition because gambling is a highly regulated industry. These companies can also enjoy healthy margins and profits. Have you ever heard the phrase ‘the house always wins’? Regulation cuts both ways, however, and casinos may face stroke-of-the-pen risk that suddenly limits what they can or can't do and where they can do it. Furthermore, digitization is changing the game, pun intended. Whether it’s online poker or sports betting on your smartphone, innovation is forcing these players to adapt to changing consumer preferences, such as being able to wager anywhere on demand.
Sales Growth
A company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Boyd Gaming’s 3.2% annualized revenue growth over the last five years was sluggish. This shows it failed to expand in any major way and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or emerging trend. Boyd Gaming’s annualized revenue growth of 4.6% over the last two years is above its five-year trend, but we were still disappointed by the results. Note that COVID hurt Boyd Gaming’s business in 2020 and part of 2021, and it bounced back in a big way thereafter.
We can better understand the company’s revenue dynamics by analyzing its most important segment, Gaming. Over the last two years, Boyd Gaming’s Gaming revenue (casino games) averaged 2.5% year-on-year declines. This segment has lagged the company’s overall sales.
This quarter, Boyd Gaming reported year-on-year revenue growth of 6.4%, and its $961.2 million of revenue exceeded Wall Street’s estimates by 4.8%.
Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates the market believes its products and services will see some demand headwinds.
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Cash Is King
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Boyd Gaming has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 14.5% over the last two years, better than the broader consumer discretionary sector.
Key Takeaways from Boyd Gaming’s Q3 Results
We enjoyed seeing Boyd Gaming exceed analysts’ revenue expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock remained flat at $64.31 immediately after reporting.
Should you buy the stock or not?When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
