Boyd Gaming Among Mid-Cap Stocks Poised to Deliver Q3 Earnings Surprises

Posted on: October 11, 2021, 07:51h. 

Last updated on: October 11, 2021, 09:51h.

Already up nearly 50 percent year-to-date, Boyd Gaming (NYSE:BYD) stock has the makings of an earnings season winner, according to Bank of America.

Boyd stock
Boyd Gaming’s Orleans in Las Vegas. Bank of America says the stock could be a Q3 earnings winner. (Image: Las Vegas Review-Journal)

Bank of America strategists Jill Carey Hall and Savita Subramanian recently cobbled together a list of mid- and small-cap equities that could deliver upside surprises when third-quarter earnings season kicks off next week. Boyd made the cut. The regional casino operator has a market capitalization of $7.25 billion, putting it firmly in mid-cap territory.

With 3Q earnings kicking off next week, we screen for small/mid-caps that could surprise to the upside/downside, based on based on Buy/Underperform-rated stocks, where our analysts’ estimates are above/below consensus and which beat/missed last quarter,” said the Bank of America strategists.

The Orleans operator reports third-quarter results after the close of markets on Oct. 26. Analysts expected the gaming company to deliver earnings per share (EPS) of $1.22 for the July through September period on revenue of $836.86 million. Over the past 90 days, there have been nine upward revisions to that EPS forecast. Boyd is on a four quarter streak of beating consensus EPS forecasts.

Betting on Boyd Stock

Like other operators focusing on Las Vegas locals and regional markets, Boyd is benefiting from margin expansion during the coronavirus pandemic.

Bank of America highlights the name as a reopening play, with more multiple tailwinds. Las Vegas-based Boyd runs 28 gaming venues across 10 states, including 11 in its home city. Its Sin City venues include the Aliante, Gold Coast, Main Street Station, Sam’s Town, and the Orleans. Translation: The operator has no exposure to Macau — the Chinese territory that’s fast become a trouble spot for some gaming companies.

Additionally, some analysts believe that the Boyd margin story that was built due in large part to the coronavirus pandemic can remain in place as COVID-19 fades. They also said that the operator will capitalize on its prime positioning in the Las Vegas locals market.

“A more streamlined cost structure remains, sustaining very high margins. We remain confident in our forecasts,” said Morgan Stanley analyst Thomas Allen in a note on Boyd out last month.

Allen has an “overweight” rating on the stock with a price target of $82. Boyd stock currently trades around $64.50.

Other Boyd Benefits

Boyd has some exposure to the fast-growing iGaming and sports wagering segments. Those are traits some on Wall Street argue aren’t adequately priced into the shares.

Boyd owns five percent of FanDuel, giving it a low-risk avenue into the proliferation of sports wagering in the US. It’s also a possible monetization tool should Flutter Entertainment spin-off the sportsbook operator.

Wells Fargo says the operator’s five percent stake in FanDuel is worth $12 a share.