One of the ideas Boyd Gaming Corp. has for its ever-increasing profits is expanding the downtown Las Vegas Fremont casino.
The Las Vegas company continues positive growth; in fact, Boyd Gaming is one of the largest local casino operators in Southern Nevada.
Keith Smith, president, and CEO of the regional gaming company, indicated that a strong fourth quarter is encouraging the company to consider its options. One of the two possible capital expense options for Boyd Gaming is expanding the Fremont casino.
“We don’t have any specific goals right now, but we’re thinking about expanding the casino,” Smith said during a conference call with investors following the release of the company’s fourth-quarter earnings.
“We’ve owned a lot towards the backside of the Fremont for a while now,” he said. “We’ve considered several different projects for that spot. The fact is, the casino is at capacity many nights during the week and what we really need is additional casino space. We’re considering a very modest expansion.”
Potential Capital Expenditure
The Fremont expansion is only one of two potential capital expenditure projects Smith mentioned in the call. The other option is to take advantage of new legislation in Louisiana allowing casino operators to convert riverboats to land-based casinos. That would be an option for Boyd’s Treasure Chest Casino in Kenner, Louisiana.
Smith did not mention cost estimates or preferences concerning which project to pursue during the call. He also theorized that the company could use the extra earnings to reduce debt, as well as increase shareholder value with higher dividends or stock buybacks.
Boyd’s three downtown Las Vegas properties reported record adjusted cash flow numbers and the adjusted numbers for all of the company’s Southern Nevada locations were the highest since 2005.
The company had a net income of $24.3 million; that’s 21 cents a share, on revenue of $833.1 million for the fourth quarter of 2019. Last year, Boyd’s earned slightly less, with a net income of $22.9 million, 20 cents a share, on revenue of $791.6 million.
A survey of a dozen analysts produced projected earnings on average of 47 cents and revenue of $825.6 million.
Smith noted that Southern Nevada’s growing economy has boosted the company’s earnings as it has an increasing number of sports betting customers.
Smith also noted that an additional 1,000-rooms in downtown Las Vegas didn’t hurt. The Downtown Grand added new rooms this summer and the new Circa opened in December. He also praised the expansion of the Las Vegas Convention Center, which accommodated March’s massive return of the ConExpo-Con/Agg construction industry trade show. Finally, April’s NFL Draft event in Las Vegas as well as, the Raiders relocating to Las Vegas for their 2020 season, really put the local economy into overdrive.
“When we look at the event calendar and you consider a convention like ConExpo coming to town and then you think about the Raiders. It’s just more tourist activity in Las Vegas overall. It only adds to an already strong local environment,” he said. “We run pretty good room rates and pretty high occupancies as it is. Obviously, when Las Vegas is full we’ll be able to leverage it out even further. But it isn’t only about one event. That is certainly helpful, but things aren’t driven just by that.”
Barry Jonas, a gaming industry analyst for Atlanta-based SunTrust Robinson Humphrey, told investors that he doesn’t think the opening of Circa will hurt Boyd’s profitability.
“While we could see some modest push back from the initial trials around the opening of the Circa late this year, ultimately we feel that Boyd’s unique Hawaiian marketing is quite sticky and likely to experience limited impact,” said Jonas. He was referring to Boyd’s hefty marketing that’s designed to draw Hawaii residents to their downtown properties.
Additional traffic from sports betting
Smith noted that sports betting was driving more traffic to the company’s Southern and Midwestern properties, but that it wasn’t the winning bets increasing revenue.
“The big underlying trend we’re seeing in the Southern and Midwestern segment has been further enforced by this year’s introduction of sports betting at five of our regional properties. The sportsbooks opened at Blue Chip, Belterra Resort in Indiana, Valley Forge Pennsylvania, Diamond Jo Dubuque, and Diamond Jo Worth in Iowa, have attracted new faces and expanded our customer base,” Smith noted. “Once they’re on our property, the new customers are not just placing a bet on the game. They’re also enjoying our restaurants, our bars and playing in our casinos.”
Boyd has partnered with the daily fantasy sports company FanDuel to operate its regional casino sportsbooks. Boyd is also considering launching a sportsbook at its Par-A-Dice casino in Illinois.
Boyd stock moved higher on the New York Stock Exchange recently, up 1.9%, 65 cents, to $34.74 a share. On volume, that’s twice the average daily volume. After hours, shares fell by $1.74, 5 percent, to end at $33 a share.
Boyd Gaming Corporation
Fourth-quarter earnings and revenue for Las Vegas-based Boyd Gaming Corp. Boyd’s operates The Orleans. Sam’s Town, three downtown Las Vegas properties and a few other hotel-casinos. (NYSE: BYD)
Revenue
4th Quarter 2019: $833.1 million
4th Quarter 2018: $791.6 million
Change: +5.2%
Net income
4th Quarter 2019: $24.3 million
4th Quarter 2018: $22.9 million
Change: +6.1%
Earnings per share
4th Quarter 2019: 21 cents
4th Quarter 2018: 20 cents
Change: +5%
