Analyst sees Boyd stock as a compelling story.
Boyd Gaming (NYSE:BYD) stock rose 3% in early trading on Friday as the casino operator posted its best quarterly results in three years by some metrics.
The company generated $1.03 billion in revenue in the quarter, up 7% year-over-year and beyond estimates of $980 million.
Net Income rose 8% to $151 million, or $1.84 per share, which easily topped estimates of $1.67 per share. Further, its adjusted EBITDAR, earnings adjusted for rent expenses, was $358 million, up 4% year-over-year.
The company, which owns 28 casinos in 10 states, achieved its strongest property-level revenue and adjusted EBITDAR growth in more than three years, said Keith Smith, president and CEO. Property-level margins exceed 40%, he added.
Online revenue surges
Boyd Gaming saw revenue rise about 4% within its gaming segment to $671 million, but it got the biggest lift from its online gaming business. Online gaming revenue rose 33% to $173 million.
The firm also had its strongest quarter in two years within its Las Vegas Locals segment, which are its Vegas area hotels that are not on the Strip. This area saw revenue increase 2% to $229 million. But the Midwest and South casinos were the best performers, with revenue increasing 3.5% to $540 million. The Downtown Vegas casinos saw revenue drop 4% to $55 million.
The casino operator also improved its balance sheet with the $1.75 billion sale of its 5% stake in FanDuel back to its owner, Flutter (NASDAQ:FLUT). Boyd will use much of the proceeds to pay down its $3.6 billion in debt. As part of the new deal, Boyd will continue to offer FanDuel in its casinos in several states, including Iowa, Indiana, Kansas, Louisiana, and Pennsylvania for a fixed fee.
“Looking ahead, the recently announced transaction to sell our equity stake in FanDuel will further strengthen the Company’s financial position as we continue to invest in our properties, pursue growth opportunities, return capital to shareholders and maintain a strong balance sheet – a strategy that continues to drive long-term shareholder value,” Smith said.
Analyst sees “compelling” story
Boyd stock got a couple of analyst upgrades on Friday from Mizuho, which raised its target $3 to $89 per share, and Stifel, which bumped it up $3 to $90 per share.
Both were pleased with the FanDuel deal and that Boyd expressed a desire to use the proceeds to reduce its debt and improve its financials.
Mizuho’s Ben Chaiken placed an outperform rating on the stock and said the low valuation and improving fundamentals make a “compelling story,” reported the Fly.
The stock is currently trading at around $84 per share with a P/E ratio of 12. It has a median price target of $87 per share, which would suggest 4% growth. Because of these factors and its diversified portfolio with casinos outside of Vegas, it is not a bad option within the subset of casino stocks.
