Expansive Growth In Property Investments And Digital Ventures Fuels Future Earnings Potential

Key Takeaways

• Strategic property investments and developments are poised to boost revenue and margins by accessing underserved markets and leveraging unmet demand.
  
• Continued expansion in the online segment and disciplined capital allocation strategies aim to enhance shareholder value and long-term earnings growth.
  
• Competitive pressures and potential disruptions in key segments and projects could challenge Boyd Gaming's revenue and margins amidst market uncertainties and strategic investments.

Catalysts

Operates as a multi-jurisdictional gaming company in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio, and Pennsylvania.

• Boyd Gaming's recent property investments are expected to drive growth, such as Treasure Chest's strong revenue performance and future projects like Cadence Crossing Casino and Cadence planned expansions, positively impacting revenue and EBITDAR margins.
  
• The development and expansion projects, such as Ameristar St. Charles' convention center and the Norfolk, Virginia casino resort, are anticipated to increase revenue streams and improve EBITDAR margins through tapping into unmet demand and underserved markets.
  
• The continued growth in the online segment, driven by partnerships like FanDuel and new acquisitions such as Resorts Digital, suggests potential for higher revenue and earnings in the digital space.
  
• Strong growth investments and renovation projects across various properties, including Suncoast in Las Vegas, should enhance competitive positioning and potentially improve net margins through increased demand and efficient operations.
  
• The disciplined approach to capital allocation, including continued share repurchases, dividend programs, and maintaining low leverage, is expected to create shareholder value and enhance earnings per share over the long term.

Boyd Gaming Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Boyd Gaming's revenue will grow by 1.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 13.0% today to 14.5% in 3 years time.
• Analysts expect earnings to reach $583.0 million (and earnings per share of $7.8) by about October 2027, up from $500.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 12.0x on those 2027 earnings, down from 13.1x today. This future PE is lower than the current PE for the US Hospitality industry at 23.9x.
• Analysts expect the number of shares outstanding to decline by 6.62% per year for the next 3 years.
• To value all of this in today's dollars, we will use a discount rate of 8.48%, as per the Simply Wall St company report.

Boyd Gaming Future Earnings Per Share Growth

Risks

• Competitive pressures in the Las Vegas Locals segment, particularly impacting properties like the Orleans and Gold Coast, could challenge revenue and net margins if competitors continue their aggressive marketing strategies.
  
• Potential disruption from the ongoing Tropicana I-15 interchange project, which affects customer access to the Orleans property, might negatively impact revenue and earnings if it extends into 2025 as anticipated.
  
• The ramp-up and impact of newly opened and planned developments like Treasure Chest and Cadence Crossing depend on consistent demand, and any shortfall in expected returns could affect overall financial performance, including net margins and revenue growth.
  
• The $750 million investment in the Norfolk, Virginia project carries risks related to construction costs and market competition, which could impact earnings if projected returns are not achieved.
  
• Challenges related to maintaining high EBITDAR margins, especially in the face of potential cost fluctuations, could affect earnings if efficiencies cannot be sustained across segments like the Midwest and South.

Valuation

• The analysts have a consensus price target of $73.86 for Boyd Gaming based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $82.0, and the most bearish reporting a price target of just $67.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2027, revenues will be $4.0 billion, earnings will come to $583.0 million, and it would be trading on a PE ratio of 12.0x, assuming you use a discount rate of 8.5%.
  
• Given the current share price of $71.63, the analyst's price target of $73.86 is 3.0% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.