Las Vegas-based regional casino operator Boyd Gaming Corp. posted some record-breaking cash flow numbers as it kicked off the third-quarter earnings season for publicly traded casino and tourism companies Tuesday.
Boyd, which has 10 Southern Nevada properties including three in downtown Las Vegas, rode the city’s robust economy for increased visitation to its properties and expanded sports betting in four Midwest markets while introducing a mobile sports-wagering smartphone app in the Pennsylvania market with its partner, FanDuel.
“Economic strength and growing visitation helped drive continued growth in gaming revenues,” Boyd President and CEO Keith Smith said in a conference call with investors Tuesday. “We also saw double-digit (percentage) gains in our hotel revenues with strong improvements in room occupancy and rate across the segment.
“Thanks to ongoing operational and marketing refinements, incremental revenue flowed through to the bottom line, resulting in the 18th consecutive quarter of cash flow growth in our locals segment.”
The company reported net income of $39.4 million, 35 cents a share, on revenue of $819.6 million for the quarter that ended Sept. 30. That compared with income of $11.8 million, 10 cents a share, on revenue of $612.2 million in the third quarter of 2018.
Despite the gains, the company still missed analysts’ expectations averaging earnings per share of 39 cents and revenue of $828.9 million based on a survey of 11 investment analysts.
In a report to investors, New York-based J.P. Morgan analyst Joseph Greff said Boyd results were uneven with Las Vegas properties strong but the South and Midwest regions falling short of expectations.
“Importantly, we are encouraged by the third quarter’s accelerating growth in the Las Vegas Locals segment (we think Boyd is likely growing faster than the overall Las Vegas Locals market), a fairly benign competitive market with no incremental pressure from Palms’ new offerings on Boyd’s Gold Coast results so far in the fourth quarter,” Greff wrote. “Similarly, we like management’s focus on using its free cash flow to reduce balance sheet leverage.”
The only negative blip in the quarter resulted from a hurricane and tropical storm affecting the company’s Louisiana and Texas markets for several days and decreasing potential revenue.
Hurricane Barry, which caused an estimated $600 million in damage in Louisiana, closed three Boyd properties over a weekend in July, and Tropical Storm Imelda, the fifth-wettest tropical cyclone on record, affected travel in Louisiana and Texas in September.
Smith was enthused with several record performances in Southern Nevada during the quarter.
Downtown Las Vegas set a cash flow record for the fourth straight quarter. The quarter was the ninth consecutive quarter of cash flow growth, and the Las Vegas segment had its highest third-quarter cash flow total since 2005. It also was the fifth straight year of quarterly margin improvement.
Smith gave no indication Boyd is interested in re-entering the Las Vegas Strip market, which some analysts have speculated with the possibility of Caesars Entertainment Corp. divesting some properties in its plan to merge with Eldorado Resorts Inc. Instead, the company plans to focus on reducing debt and solidifying its financial status. The company once had a Strip presence when it operated the Stardust, now the site of Genting’s Resorts World Las Vegas.
“Achieving and maintaining our long-term leverage target is a priority, and we will continue to balance debt repayment with selective reinvestments in our core business and returning capital to shareholders,” Smith said. “We will remain disciplined and prudent in the allocation of our capital. While we believe there are attractive future opportunities to invest in our existing business, we will do so only when these investments offer an appropriate return.”
Smith indicated the fortunes of downtown Las Vegas are improving with the opening of around 2,000 hotel rooms in future years, and that should help Boyd, which operates the Fremont, California Hotel and Main Street Station properties.
Smith was referencing the future completion of Circa (777 rooms), Marriott Symphony Park (406), the expansion of Downtown Grand (496) and the 601 Fremont project at El Cortez (300) with 81 rooms opened as Hotel Apache earlier this year at Binion’s.
“Southern Nevada’s economy remains on solid ground giving us confidence in the future of our locals business,” he said.
Boyd shares were up 27 cents, 1 percent, to $26.16, in slightly above average trading volume on Tuesday, but the stock retreated 96 cents, 3.7 percent, to $25.20 in after-hours trading.
Boyd Gaming Corp.
Third-quarter revenue and earnings for Las Vegas-based Boyd Gaming Corp., operator of Sam’s Town, The Orleans, three downtown Las Vegas properties and several other casino properties. (NYSE: BYD)
3Q 2019: $819.6 million
3Q 2018: $612.2 million
3Q 2019: $39.4 million
3Q 2018: $11.8 million
Earnings per share
3Q 2019: 35 cents
3Q 2018: 10 cents