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Gaming and hospitality company Boyd Gaming (NYSE:BYD) reported Q2 CY2024 results topping analysts' expectations, with revenue up 5.5% year on year to $967.5 million. It made a non-GAAP profit of $1.58 per share, down from its profit of $1.89 per share in the same quarter last year.
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Boyd Gaming (BYD) Q2 CY2024 Highlights:
- Revenue: $967.5 million vs analyst estimates of $909.5 million (6.4% beat)
- EPS (non-GAAP): $1.58 vs analyst estimates of $1.49 (6.1% beat)
- Gross Margin (GAAP): 53.8%, down from 65.5% in the same quarter last year
- Market Capitalization: $5.48 billion
Run by the Boyd family, Boyd Gaming (NYSE:BYD) is a diversified operator of gaming entertainment properties across the United States, offering casino games, hotel accommodations, and dining.
Casino OperatorCasino operators enjoy limited competition because gambling is a highly regulated industry. These companies can also enjoy healthy margins and profits. Have you ever heard the phrase ‘the house always wins’? Regulation cuts both ways, however, and casinos may face stroke-of-the-pen risk that suddenly limits what they can or can't do and 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 these players to adapt to changing consumer preferences, such as being able to wager anywhere on demand.
Sales GrowthA company's long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. Unfortunately, Boyd Gaming's 4.2% annualized revenue growth over the last five years was weak. This shows it failed to expand in any major way and is a rough starting point for our analysis.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Boyd Gaming's annualized revenue growth of 4.3% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak. Note that COVID hurt Boyd Gaming's business in 2020 and part of 2021, and it bounced back in a big way thereafter.
We can better understand the company's revenue dynamics by analyzing its most important segment, Gaming. Over the last two years, Boyd Gaming's Gaming revenue (casino games) averaged 2.6% year-on-year declines. This segment has lagged the company's overall sales.
This quarter, Boyd Gaming reported solid year-on-year revenue growth of 5.5%, and its $967.5 million of revenue outperformed Wall Street's estimates by 6.4%. 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 as it shows the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. It's also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Boyd Gaming's operating margin has shrunk over the last year, but it still averaged 24.6%, elite for a consumer discretionary business. This shows it's an optimally-run company with an efficient cost structure.
In Q2, Boyd Gaming generated an operating profit margin of 23.5%, down 3.1 percentage points year on year. This contraction shows it was recently less efficient because its expenses grew faster than its revenue.
Key Takeaways from Boyd Gaming's Q2 ResultsWe were impressed by how significantly Boyd Gaming blew past analysts' revenue expectations this quarter. We were also glad its EPS outperformed Wall Street's estimates. Overall, we think this was a strong quarter that should satisfy shareholders. The stock traded up 3% to $60.25 immediately after reporting.
