Bain: Boyd Gaming ‘Holds All the Cards’ for Future Acquisitions

Boyd Gaming (NYSE: BYD) executives kept M&A commentary to a minimum on their Q2 earnings call, but Wall Street is convinced the regional casino operator is primed to pounce on upcoming acquisition opportunities.

In a note to clients, Texas Capital analyst David Bain said Boyd “is in a unique position to capitalize on” a brisk consolidation environment in the casino industry, adding that the right deal could be a “large potential stock catalyst.”

Much of the speculation around Boyd and industry consolidation involves the Suncoast operator being a potential buyer of assets that Caesars Entertainment (NASDAQ: CZR) could be forced to part with if it’s acquired by Fertitta Entertainment Inc.

On a conference call with analysts, Boyd, as it has in the past, expressed interest in deal-making, but didn’t get into specific possibilities.

Las Vegas-based Boyd had $322.7 million in cash on hand at the end of the second quarter and one of the lowest leverage ratios in the industry, confirming it has the ability to add to its portfolio via acquisition should it choose to do so.

Boyd in Strong Position for M&A

It’s widely expected that with Caesars and Tilman Fertitta working on a deal and with Barry Diller’s People Inc. (NASDAQ: PPLI) pursuing MGM Resorts International (NYSE: MGM), a slew of gaming venues could come to market after those deals.

Analysts believe Boyd is among a small number of companies that could be credible buyers of assets that come up for sale.

However, Boyd is likely to be a selective shopper and it’s unlikely to rush into an acquisition that doesn’t involve ownership of real estate.

That significantly lengthens the odds of Boyd buying an MGM property, should one hit the market, and it limits the pool of Caesars venues from which Boyd could select. Bottom line: Boyd doesn’t need to rush into a deal.

“The business is performing at a very high level,” added Smith on the call. “We’re returning significant dollars to our shareholders. We have a strong balance sheet. And so we don’t need to do M&A, but if the right opportunity comes along, we certainly have our eyes open, we’re not afraid to execute.”

A Solid Q2 For Boyd

Underscoring why it doesn’t need to hurry into an acquisition, Boyd posted solid second-quarter results, driven by $350 million in adjusted EBITDAR—beating consensus estimates by 3%. Total revenue held firm at $960 million, up 1.5% year-over-year.

The operator’s Las Vegas locals segment posted EBITDAR of $180 million, topping forecasts by 3%. However, that figure fell 6% short of the prior-year period, a dip largely driven by softer visitation at destination properties like The Orleans, where room occupancy dipped 250 basis points.

That West Coast lag was offset by robust momentum across Boyd’s Midwest and South regional footprint. Regional EBITDAR rose 4% year-over-year to $210 million, expanding operating margins by 20 basis points to 38.5%.