Stock Story -
Gaming and hospitality company Boyd Gaming (NYSE:BYD) beat analysts' expectations in Q4 FY2023, with revenue up 3.4% year on year to $954.4 million. It made a non-GAAP profit of $1.66 per share, down from its profit of $1.72 per share in the same quarter last year.
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Boyd Gaming (BYD) Q4 FY2023 Highlights:
- Revenue: $954.4 million vs analyst estimates of $929.1 million (2.7% beat)
- EPS (non-GAAP): $1.66 vs analyst estimates of $1.49 (11.8% beat)
- Gross Margin (GAAP): 52.9%, down from 72.1% in the same quarter last year
- Market Capitalization: $6.26 billion
Casinos and GamingCasino and gaming companies that offer slot machines, Texas Hold ‘Em, Blackjack and the like can enjoy limited competition because gambling is a highly regulated industry. These companies can also enjoy healthy margins and profits because have you ever heard the phrase ‘the house always wins’? On the other hand, regulation cuts both ways and casino and gaming companies may face stroke-of-the-pen risk that suddenly limits what they do or where they can do it. Furthermore, digitization is changing the game, pun intended. Whether it’s online poker or sports betting on your smartphone, innovation is forcing casino and gaming companies to innovate and adapt to keep up with changing consumer preferences such as being able to wager anywhere on-demand.
Sales GrowthExamining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Boyd Gaming's annualized revenue growth rate of 7.3% over the last 5 years was weak for a consumer discretionary business. Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. Boyd Gaming's recent history shows the business has slowed, as its annualized revenue growth of 5.3% over the last 2 years is below its 5-year trend.
We can dig even further into the company's revenue dynamics by analyzing its most important segment, Las Vegas. Over the last 2 years, Boyd Gaming's Las Vegas revenue (casinos, hotels) averaged 3.5% year-on-year growth. This segment has lagged the company's overall sales.
This quarter, Boyd Gaming reported reasonable year-on-year revenue growth of 3.4%, and its $954.4 million of revenue topped Wall Street's estimates by 2.7%. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months, a deceleration from this quarter.
Operating MarginOperating margin is an important measure of profitability. It’s the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. Operating margin is also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Boyd Gaming has been a well-oiled machine over the last two years. It's demonstrated elite profitability for a consumer discretionary business, boasting an average operating margin of 25.9%. In Q4, Boyd Gaming generated an operating profit margin of 16.2%, down 10.6 percentage points year on year. This reduction indicates the company was less efficient with its expenses over the last quarter, spending more money in areas like corporate overhead and advertising.
Over the next 12 months, Wall Street expects Boyd Gaming to maintain its LTM operating margin of 24.1%.Key Takeaways from Boyd Gaming's Q4 Results It was good to see Boyd Gaming beat analysts' revenue and EPS expectations this quarter, driven by better-than-expected performance in its Las Vegas segment. That stood out as a positive in these results. On the other hand, its operating margin missed Wall Street's estimates. Overall, the results could have been better. The stock is up 3.8% after reporting and currently trades at $68 per share.
