Regional Casino Operator Boyd Gaming Reports Continued Weak Results in the Third Quarter

Regional casino operator Boyd Gaming BYD reported weak third-quarter results that were slightly below our expectations. Revenue declined 0.9% to $590 million and EBITDA increased 6.8% to $114.2 million, with EBITDA margins improving 140 basis points to 19.4%. The increase in EBITDA and EBITDA margins was driven by cost cutting and operating efficiencies successfully implemented by management. The third-quarter results did not cause us to make any material changes to our financial model, and our fair value estimate for Boyd of $6 per share remains unchanged. We currently view Boyd as moderately overvalued, and we continue to recommend that long-term value investors avoid taking a long position in the stock due to Boyd's concentration of casinos in unattractive geographic markets. While management has excelled recently in increasing EBITDA through cost-cutting measures and operating inefficiencies, we think that absent renewed sales growth, increasing EBITDA through expense measures is not sustainable beyond the next two to three quarters.