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Boyd Gaming Banks on Sports Betting Expansion, Costs High

Zacks Equity Research

Boyd Gaming Corporation BYD is poised to benefit from sports betting expansion, strategic buyouts and organic growth across its businesses — Las Vegas Locals, Downtown Las Vegas as well as Midwest and South Segment. Also, the company’s initiative regarding the legalization of sports gambling along with expansion of online betting offerings bodes well.

However, high debt burden and increased costs from food, beverage, gaming and lodging offerings have been hurting the company. Notably, shares of Boyd Gaming have plunged 45.3% in the past year compared with the industry’s decline of 31.2%.

 

Let’s discuss the factors that substantiate the company’s Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Growth Catalysts

Boyd Gaming’s strategic initiatives like strengthening of existing operations and capital investment bode well. Also, acquisitions play a major role in expanding its brand presence. In 2019, total revenues increased $699.4 million or 26.6% from the year-ago period’s level primarily owing to the acquisitions of Lattner, Valley Forge, Ameristar Kansas City, Ameristar St. Charles, Belterra Resort and Belterra Park.

Boyd Gaming’s efforts to expand online betting offerings look encouraging. During the third quarter of 2019, the company partnered with FanDuel Group for the opening of sports books at Blue Chip, Belterra Resort, Diamond Jo Dubuque and Diamond Jo Worth properties in the Midwest. It also introduced a market-leading mobile betting app in Pennsylvania. In July 2018, it had entered into a partnership with MGM Resorts International MGM. Per the deal, the companies can offer online and mobile gaming platforms, including sports betting, casino gaming and poker in jurisdictions wherein they have casino resorts and online licenses.

Backed by these initiatives, Boyd Gaming impressed investors with solid top- and bottom-line performances. On a year-over-year basis, the bottom line improved 21.1%, 69.6% and 56.3% in the second, the third and the fourth quarter of 2019, respectively, on higher margins. Meanwhile, the top line rallied 37.2%, 34% and 5.2% in the second, the third and the fourth quarter of 2019, respectively, on a year-over-year basis. Also, adjusted EBITDAR in the fourth-quarter 2019 was reported at $227.6 million, up 9.1% from $208.6 million in the year-ago quarter..

Concerns

Despite several margin improvement initiatives, Boyd Gaming faces higher expenses across gaming, food and beverage, room as well as other offerings. Moreover, heightened competition with new entries in the already high-supply market is alarming.

Boyd Gaming’s heavy reliance on debt financing is a concern. As of Dec 31, 2019, the company had a total debt of $3.81 billion. Owing to higher debt burden, the company might fail to finance upcoming projects. Also, any downturn in the macroeconomic and credit market conditions might make it difficult for the company to pay or refinance its debts moving ahead.

Key Picks

Few better-ranked stocks in the Zacks Consumer Discretionary sector are Vista Outdoor Inc. VSTO and YETI Holdings, Inc. YETI, each sporting a Zacks Rank #1.

Vista Outdoor 2020 earnings are expected to surge 42.9%.

YETI Holdings has a three-five year expected EPS growth rate of 20%.

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MGM Resorts International (MGM) : Free Stock Analysis Report
 
Boyd Gaming Corporation (BYD) : Free Stock Analysis Report
 
Vista Outdoor Inc. (VSTO) : Free Stock Analysis Report
 
YETI Holdings, Inc. (YETI) : Free Stock Analysis Report
 
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