Boyd Gaming Corporation (BYD - Free Report) is riding high on robust strategic initiatives, sales and earnings growth, and EBITDA and margins improvement. As a result, shares of the company have rallied 38.4% in a year’s time compared with the industry’s 4% growth. However, high debt and intense competition remain concerns for the company. Let’s delve deeper.
The company’s consistent focus on expansion strategy to drive growth in the long run is impressive. In addition, it is strengthening current operations and growing through capital investment as well as other strategic measures. This apart, Boyd Gaming has earlier announced that it has entered into agreement with Penn National Gaming to acquire the operations of Ameristar St. Charles; Ameristar Kansas City; Belterra Casino Resort in Florence, IN; and Belterra Park in Cincinnati, OH. It has also entered into definitive agreement with Valley Forge Convention Center Partners, L.P. to acquire Valley Forge Casino Resort in King of Prussia, PA. Per Boyd Gaming, it has plans to acquire four Pinnacle properties.
Moreover, this Zacks Rank #3 (Hold) company’s top and bottom-line growth look promising. Boyd Gaming’s revenues, which witnessed an improvement of 9.1% in 2017, are likely to continue growing in 2018 and 2019 as well. Meanwhile, the bottom line returned to growth, after witnessing a sharp decline of 42.1% in fourth-quarter 2017. In the first and second quarter of 2018, earnings have increased 21.9% and 46.2%, respectively.
Impressively, Boyd Gaming has also been generating EBITDA growth for quite some time. In second-quarter 2018, the company reported EBITDA growth for the 13th quarter out of the last 15 quarters. Its Las Vegas segment achieved 13th successive quarter of EBITDA growth as well. For 2018, Boyd Gaming raised its adjusted EBITDA guidance. The company now expects the metric to be in the range of $618-$633 million compared with $600-$620 million anticipated earlier. Markedly, it has been reporting robust operating margin growth for the past several quarters now.
Boyd Gaming’s heavy reliance on debt financing is worrisome. As of Jun 30, 2018, the company had total debt of $3.56 billion. Due to a higher debt burden, the company might fail to finance upcoming projects. Moreover, any downturn in the macroeconomic and credit market conditions would make it difficult for the company to pay or refinance its debt, going ahead.
Additionally, it is persistently facing intense competition from various casinos and hotel casinos. Apart from gaming services, other non-gaming resorts and vacation destination pose challenges to the company.
Stocks such as Penn National Gaming, Inc. (PENN - Free Report) , Red Rock Resorts, Inc. (RRR - Free Report) and Eldorado Resorts, Inc. (ERI - Free Report) , which belong to the same industry, also gained 62.3%, 46.7% and 114.1%, respectively, a year’s time. All these stocks carry a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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