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Gaming and hospitality company Boyd Gaming (NYSE:BYD) reported Q4 CY2024 results exceeding the market’s revenue expectations , with sales up 9.1% year on year to $1.04 billion. Its non-GAAP profit of $1.96 per share was 9.3% above analysts’ consensus estimates.

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Boyd Gaming (BYD) Q4 CY2024 Highlights:

• Revenue: $1.04 billion vs analyst estimates of $1.00 billion (9.1% year-on-year growth, 4% beat)

• Adjusted EPS: $1.96 vs analyst estimates of $1.79 (9.3% beat)

• Adjusted EBITDA: $351.1 million vs analyst estimates of $330.6 million (33.7% margin, 6.2% beat)

• Operating Margin: 25.1%, up from 16.2% in the same quarter last year

• Market Capitalization: $6.76 billion

Keith Smith, President and Chief Executive Officer of Boyd Gaming, said: "Our Company continued to deliver solid results in the fourth quarter, consistent with our strong full-year performance. Our diversified business model, strong operating efficiencies and contributions from our recent property investments drove revenue and EBITDAR growth on a Companywide basis during the fourth quarter, as we maintained property-level operating margins of over 40%. We also continued our balanced approach to capital allocation throughout 2024, investing in our properties nationwide, returning nearly $750 million to shareholders, and maintaining the strongest balance sheet in our Company's history. As we mark the conclusion of another successful year, we are proud of the strong foundation we have built and are confident in our strategy to deliver long-term value for our shareholders."

Company Overview

Run by the Boyd family, Boyd Gaming (NYSE:BYD) is a diversified operator of gaming entertainment properties across the United States, offering casino games, hotel accommodations, and dining.

Casino Operator

Casino operators enjoy limited competition because gambling is a highly regulated industry. These companies can also enjoy healthy margins and profits. Have you ever heard the phrase ‘the house always wins’? Regulation cuts both ways, however, and casinos may face stroke-of-the-pen risk that suddenly limits what they can or can't do and where they can do it. Furthermore, digitization is changing the game, pun intended. Whether it’s online poker or sports betting on your smartphone, innovation is forcing these players to adapt to changing consumer preferences, such as being able to wager anywhere on demand.

Sales Growth

A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Regrettably, Boyd Gaming’s sales grew at a sluggish 3.4% compounded annual growth rate over the last five years. This was below our standard for the consumer discretionary sector and is a tough starting point for our analysis.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Boyd Gaming’s annualized revenue growth of 5.1% over the last two years is above its five-year trend, but we were still disappointed by the results. Note that COVID hurt Boyd Gaming’s business in 2020 and part of 2021, and it bounced back in a big way thereafter.

We can better understand the company’s revenue dynamics by analyzing its most important segment, Gaming. Over the last two years, Boyd Gaming’s Gaming revenue (casino games) averaged 1.7% year-on-year declines. This segment has lagged the company’s overall sales.

This quarter, Boyd Gaming reported year-on-year revenue growth of 9.1%, and its $1.04 billion of revenue exceeded Wall Street’s estimates by 4%.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will face some demand challenges.

Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.

Cash Is King

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Boyd Gaming has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 14.3% over the last two years, better than the broader consumer discretionary sector.

Key Takeaways from Boyd Gaming’s Q4 Results

We enjoyed seeing Boyd Gaming exceed analysts’ revenue expectations this quarter. We were also happy its EPS outperformed Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. The stock traded up 2.5% to $80.50 immediately after reporting.

Sure, Boyd Gaming had a solid quarter, but if we look at the bigger picture, is this stock a buy? We think that the latest quarter is just one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.