Boyd Gaming Sticks to M&A Discipline as Las Vegas Drag Weighs on Q3

Shares of Boyd Gaming retreated Friday after the regional casino operator delivered tepid third-quarter results pinched by Las Vegas lethargy, though management reiterated its appetite for disciplined M&A.

One of the names most frequently attached to casino industry consolidation speculation, Boyd executives expressed interest in possibly buying what CEO Keith Smith described as a “high-quality asset,” but they’re not going to rush to make a deal.

At a time when investors are expressing preference for lower leverage casino stocks, Boyd may be rewarded for slow-playing mergers and acquisitions activity. The company concluded the September quarter with $297.2 million in cash on hand and debt of $2.7 billion.

Boyd Has a ‘Big Appetite’ and Discipline

Due to large-scale deal-making and some operators looking to prune their portfolios, prospective buyers could soon have a large menu to choose from when it comes to individual casinos that are for sale. That may be enticing, but it’s not an impetus for Boyd to break from its disciplined approach.

“We have the same discipline we’ve had over the years, which is we have a set of filters that it has to work its way through being the right asset at the right price in the right market, which means it has to be a stable market from a tax and regulatory standpoint,” said Smith on a conference call. “It has to be a high-quality asset. We have as big of an appetite as we’ve ever had, but we remain disciplined.”

For single-property acquisitions, an unstated requirement for Boyd is real estate ownership. While select regional properties in Boyd’s portfolio are leased, the company owns the underlying real estate across the vast majority of its portfolio, including its core Las Vegas holdings.

Some analysts believe Boyd could express interest in some of the nine regional casinos Churchill Downs (NASDAQ: CHDN) is selling and that may prove accurate because the seller owns the real estate of all of those venues.

Quick Look at Q3

For the third quarter, Boyd posted adjusted EBITDAR of $320 million on revenue of $991 million. Wall Street consensus had projected EBITDAR of $316 million on revenue of $1 billion.

The top-line miss was largely driven by softness across both Las Vegas Locals and Downtown segments, though operational trends could normalize as regional visitation recovers.

On the locals front, ongoing construction disruptions at The Orleans and Suncoast—two of Boyd’s flagship Las Vegas properties—are expected to clear in upcoming quarters, removing an operational headwind and providing potential catalysts for the stock.