Boyd Gaming (BYD), based in Las Vegas, owns and operates 29 gaming properties, up from 16 in 2011, explains John Staszak, an analyst with Argus Research, a leading independent Wall Street research firm.
Its properties are located in Nevada, Iowa, Mississippi, Indiana, Illinois, Kansas, Missouri, Ohio, Pennsylvania and Louisiana. Over the long term, we expect Boyd’s operating margin to increase as a result of favorable operating leverage at the company’s Las Vegas properties and at some regional casinos.
The company is benefiting from efforts to cut costs (through executive pay cuts, employee furloughs, and the elimination of nonessential spending) as well as from recent acquisitions. We see the company’s partnership with FanDuel and the expansion of its online betting platform as future growth drivers.
In March, Boyd Gaming agreed to acquire Pala Interactive, an interactive gaming technology company, for $170 million. We think that the acquisition will enable BYD to gain market share, expand its customer database, and attract customers to its land-based casinos.
Over the long term, we expect Boyd’s operating margin to increase as a result of favorable operating leverage at the company’s Las Vegas properties and at some regional casinos. Reflecting the company’s extensive development pipeline, our long-term earnings growth rate estimate is 18%.
On July 26, 2022, Boyd reported 2Q22 net revenue of $895 million, up from $894 million a year earlier. The increase reflected the impact of casino reopenings and pent-up demand. The consensus estimate had called for revenue of $872 million.
We are raising our 2022 EPS estimate to $5.35 from $5.30 and our 2023 estimate to $5.80 from $5.75. BYD shares are trading at 10-times our revised 2022 EPS estimate, below the midpoint of their three-year range of 4-28. We believe that a higher multiple is warranted based on our expectations for a full earnings recovery next year.
In February 2022, BYD announced that it would pay a quarterly dividend of $0.15. Our dividend estimates are $0.45 for 2022 and $0.80 for 2023.
BYD shares are trading at 10-times our revised 2022 EPS estimate. We believe that a higher multiple is warranted based on our expectations for a full earnings recovery next year. Our revised target price of $64 implies a projected 2022 P/E of 11 and a potential total return of more than 17% from current levels.
