Boyd Gaming (BYD) owns and operates 29 gaming properties, up from 16 in 2011. The company’s properties are located in Nevada, Iowa, Mississippi, Indiana, Illinois, Kansas, Missouri, Ohio, Pennsylvania and Louisiana, notes John Staszak, an analyst with Argus Research.

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. 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.

BYD shares have gained 120% since our upgrade to "buy" on 10/30/20. Based on prospects for higher margins and recovery in the company’s regional and Las Vegas markets, we think the shares can move higher.

On April 27, Boyd reported 1Q21 net revenue of $753 million, up approximately 11% from the prior-year period. The increase reflected the impact of casino reopenings, strong results in March and pent-up demand.

In all, Boyd posted first-quarter adjusted EBITDAR of $311 million, $112 million above consensus and up $148 million from the prior year.

The adjusted EBITDAR margin rose to 41% from 24%. Interest expense rose to $58 million from $52 million. Adjusted earnings rose to $0.93 per share from $0.02 in 2Q20, and topped the consensus by $0.49.

The share count rose by approximately 250,000 to just under 114 million shares. In 2020, revenue fell 35% to $2.2 billion. The company posted a loss of $0.16 per share, down from EPS of $1.78 in 2019.

To manage expenses, Boyd has substantially reduced executive pay and furloughed many employees. Looking ahead, management said that it expects to be able to hire all the help it needs and that wages remain muted.

Based on expected benefits from cost-cutting, casino reopenings and much stronger-than-expected 2Q21 earnings, we are raising our 2021 EPS estimate to $2.30 from $2.20 and our 2022 estimate to $2.89 from $2.80.

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%.

In March 2020, the company suspended both share buybacks and dividend payments. We expect the dividend to be restored in 2021, with an annualized payout of $0.24. For 2022, we project an annual dividend of $0.28.

Boyd Gaming, based in Las Vegas, owns and operates 29 gaming properties, up from 16 in 2011. The company’s properties are located in Nevada, Iowa, Mississippi, Indiana, Illinois, Kansas, Missouri, Ohio, Pennsylvania and Louisiana. With a market cap of $7.4 billion, BYD is generally considered a mid-cap growth stock. 

BYD shares are trading at 23.5-times our revised 2022 EPS estimate, near the top of their three-year range of 4-27. We believe that a higher multiple is warranted based on our expectations for a full recovery next year. Our revised target price of $79 implies a projected 2022 P/E of 27.3.

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