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Boyd Gaming (BYD) Banks on Las Vegas Operations, High Costs Ail

Boyd Gaming Corporation BYD will likely benefit from Las Vegas operations, FanDuel partnership and portfolio expansion efforts. This and focus on acquisition initiatives bode well. However, elevated operating expenses are a concern.

Let us discuss the factors highlighting why investors should retain the stock for the time being.

Factors Driving Growth

Boyd Gaming considers the local market in Las Vegas as a major driver for its portfolios. With restaurants and bars open, frequent visitations by locals are likely to drive growth for the company. Despite omicron-induced headwinds during the first quarter of 2022, the company reported positive customer trends with respect to guest counts, frequency and spending. During the quarter, the segment’s gaming revenues were up 16.3% year over year. The segment’s EBITDAR was up nearly 31% from the prior-year quarter’s levels. With properties now open and visitation in recovery mode, the company anticipates continuing momentum in the upcoming quarters. This and emphasis on core customers and streamlining cost structures will likely add to the upside.

Since the coronavirus outbreak, Boyd Gaming has been witnessing a solid performance by its interactive gaming platform. Thanks to its strategic partnership with FanDuel, the company is optimistic regarding its future in the iGaming industry. During fourth-quarter 2021, the company opened FanDuel Sportsbooks at its Louisiana properties and launched mobile sports betting in the region. The company is optimistic about online gaming prospects in Ohio. It anticipates launching FanDuel retail and mobile sportsbooks in the state by 2022-end. Given the growth opportunities related to the expansion in new markets and digital opportunities in online casino gaming, the company anticipates EBITDAR (from its online operations) to exceed $30 million in 2022.

Boyd Gaming focuses on strengthening land-based and online operations through capital investments. Currently, the company is working on the Sky River Casino site. The resort comprises 2,000 slot machines, 80 table games and 17 food and beverage offerings. With steel in the ground, the company expects to open doors by fourth-quarter 2022. The company is evaluating opportunities to reinvest in its existing operations from its regional portfolio. To this end, it has started to plan the development of a land-based facility at Treasure Chest. The company intends to begin construction in the summer of 2022 and complete it by late 2023. It is focused on enhancing its gaming and non-gaming offerings to boost the guest experience of this property.

Apart from land-based investments, the company is inclined toward the acquisition of Pala Interactive to boost its online gaming strategy. Backed by the latter’s technology (featuring a player account management system and iGaming products) and its operational and marketing expertise, the initiative allows the company to fortify its position in the emerging iGaming opportunity. The company anticipates closing the deal by first-quarter 2023.

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Zacks Investment Research


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In the past year, shares of Boyd Gaming have declined 10.8% compared with the industry’s fall of 50.7%.

Concerns

Boyd Gaming has been grappling with higher expenses across gaming, food and beverage, room, and other offerings. The company witnessed high SG&A costs in first-quarter 2022. Total operating costs and expenses in first-quarter 2022 increased 9% year over year to $609.7 million. For 2022, the company anticipates operating expenses to remain elevated owing to a rise in minimum wage rates and utility costs.

Although most of the properties have reopened, potential resurgences or new virus variants might hurt the company in the upcoming periods. Since the pandemic’s severity, duration and impact cannot be ascertained, the possibility of additional business disruptions, lower customer traffic and reduced operations cannot be ruled out.

Zacks Rank & Key Picks

Boyd Gaming currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks Consumer Discretionary sector are Bluegreen Vacations Holding Corporation BVH, Caleres, Inc. CAL and MGM Resorts International MGM.

Bluegreen Vacations sports a Zacks Rank #1. BVH has a trailing four-quarter earnings surprise of 85.9%, on average. The stock has increased 50.5% in the past year.

The Zacks Consensus Estimate for BVH’s current financial year sales and earnings per share (EPS) indicates growth of 11.2% and 35.1%, respectively, from the year-ago period’s reported levels.

Caleres sports a Zacks Rank #1. CAL has a trailing four-quarter earnings surprise of 62.9%, on average. Shares of the company have gained 0.3% in the past year.

The Zacks Consensus Estimate for CAL’s current financial year sales and EPS suggests growth of 4.8% and 0.7%, respectively, from the year-ago period’s levels.

MGM Resorts sports a Zacks Rank #1. MGM has a trailing four-quarter earnings surprise of 212.5%, on average. Shares of the company have declined 28.5% in the past year.

The Zacks Consensus Estimate for MGM’s current financial year sales and EPS suggests growth of 28.1% and 240.3%, respectively, from the year-ago period’s reported levels.


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