Boyd sees rebound signs in locals gaming market
The locals and downtown gaming markets continue to struggle against Las Vegas' stagnant economy, but Boyd Gaming Corp. executives see signs of a rebound.
The company saw little third-quarter revenue growth in those segments but the company's locals casinos, which include The Orleans, Gold Coast and Suncoast, saw cash flow -- or adjusted earnings before interest, tax, depreciation and amortization -- surge almost 18 percent, continuing an upward trend that began in the second quarter.
"As the Strip has continued to see improved results both in volumes and room rates, we've seen some of that spillover to The Orleans," Boyd President and Chief Executive Officer Keith Smith said after a Tuesday morning earnings conference call.
Boyd reported a decline in third-quarter earnings as the company's regional market revenues remained flat. Results were in line with analyst predictions.
For the three-month period ended Sept. 30, Boyd reported revenues of $590.2 million, down from $594.4 million in third quarter 2010.
Boyd reported a third-quarter net income of $3.1 million, or 4 cents a share, compared with a net income of $5.6 million, or 6 cents a share, a year earlier. Analysts polled by Thomson Reuters expected the company to earn 1 cent per share.
The Orleans remains Boyd's strongest locals casino. The property also has the most meeting and convention space of the company's Las Vegas casinos. Smith said as convention attendance continues to improve, The Orleans will reap the benefits.
"While (the locals market) remains one of the most challenged regional gaming markets, we believe Boyd has done a stellar job at cutting costs and keeping promotions rational to ensure EBITDA flow-through," Morgan Joseph gaming analyst Justin Sebastiano said in a research note to investors.
The company's three downtown Las Vegas properties saw a 2.8 percent revenue increase in the third quarter.
More than 50 percent of Boyd's downtown business is from the Hawaiian market, which the company has courted for 35 years. Boyd earlier this month began using a Boeing 767 to increase its charter capacity.
Boyd has seen an uptick in visitation and play from the Hawaiian market, but those increases are tempered by its charter service's high fuel costs, which have gone up by $850,000 year-over-year.
Smith said Boyd still plans to expand to the Strip, but its Echelon project will remain on hold until the market strengthens.
In the meantime, the company recently acquired the IP Casino Resort Spa in Biloxi, Miss., which Boyd expects will strengthen its portfolio in the South. Boyd plans to fold the IP's customers into the company's B Connected players club program early next year.
There are a few bright spots in the company's portfolio, but analysts remain cautious on Boyd's prospects.
The Atlantic City market is of particular concern, as regional casinos in Pennsylvania and New York continue to slice up the Northeast's gaming pie.
The Borgata currently has 20 percent of the market share in Atlantic City, but analysts are concerned about the effect Friday's planned opening of the casino at New York City's Aqueduct Race Track and next May's opening of Revel will have on the Borgata's customer base.
Smith said the company is aware of the new properties and is positioning the Borgata to be competitive. The resort is completing a room remodeling project in the first quarter of 2012.
Third-quarter revenues at the Borgata slid 2.7 percent. In a statement, Boyd said the property's three-day closure in August because of Hurricane Irene cost the casino roughly $10 million in lost revenues.
Contact reporter Caitlin McGarry at cmcgarry
@reviewjournal.com or 702-387-5273
