Boyd Gaming reported a strong, though not spectacular, 2016 fourth quarter Tuesday afternoon with $139 million in adjusted EBITDA, $555 million in revenues and $12.2 million in net income– translating to $0.11 per share.
The EBITDA figure was up 5.7 percent year-over-year and beat Wall Street estimates by 2 percent, while revenues were up 2.2 percent and in-line with expectations.
Other highlights of the quarter included the acquisition of the Cannery properties in Las Vegas, a strong EBITDA showing in the Las Vegas Locals segment and improvement in the Midwest and South regional markets.
“The fourth quarter was the culmination of an eventful and successful year, as we further positioned our Company for long-term growth. Our Las Vegas Locals segment grew at a healthy pace in the fourth quarter, with same-store Adjusted EBITDA reaching its highest levels in nearly a decade,” said Keith Smith, Boyd Gaming president and chief executive.
“We were also encouraged to see meaningful sequential improvement in our regional operations, which performed in-line with prior-year results after considering the impact of severe winter weather. And in December, we completed the acquisition of the Cannery and Eastside Cannery, further expanding our footprint in the attractive Las Vegas market,” he said.
Revenues for the Las Vegas locals segment was $186 million, up from $159 million from the prior year quarter but either in-line or below analyst expectations. However, the segment reported its highest same-store EBITDA and margins for the fourth quarter since 2007.
The Downtown segment dipped from 2015, registering revenues of $62 million and adjusted EBITDA of $15.5 million. Boyd attributed this to disruption to hotel room renovations and insisted that the market’s fundamentals remain strong.
Performance in the Midwest and South segments was largely a draw, with revenues down to $307 million from $322 million but EBITDA essentially even year-over-year. These figures were aided by a $2.9 million property tax refund the company received during the quarter.
Boyd also issued preliminary guidance for 2017 and is projecting adjusted EBITDA in the $585-$605 million range for the year against consensus estimates of $604 million.
“This is largely in line with our expectation as we expected a somewhat conservative approach to guidance given some of the uncertainties in the regional markets,” said John DeCree of Union Gaming. “While guidance covered the Street’s expectations, and could be somewhat conservative, we don’t think the forward outlook is optimistic enough to get the market incrementally more excited about the shares.”
Analysts were surprised by higher-than-expected capital expenditure outlays of around $220 million and noted that this figure will be closely watched by investors who had been anticipating 2017 to be the year the company began returning capital to shareholders.
“We actually believe any evidence of an overreaction to the capex outlook could present an attractive short-term tactical setup on the long side, as BYD continues to benefit from exposure to the superior growth (in the Las Vegas Locals) market, thoughtful reinvestment across its portfolio, and a continued commitment to further refining player reinvestment in the name of driving sustainable margin improvement,” said Steven M. Wieczynksi of Stifel.
Overall, the results did little to change Boyd’s status as a favorite regional gaming pick among investors, particularly as the Las Vegas Locals and Dowtown segments are predicted to continue posting strong growth.
“The solid but unspectacular results are in line with our thesis on the stock, which is that the stability and modest growth in the business should generate strong cash flow and continued deleveraging of the balance sheet and equity accretion,” said David Katz, analyst with the Telsey Group. “We believe there is relatively low risk to the company’s cash flow, with limited capital obligations and no significant competitive threats in key markets.”
