Shares of Boyd Gaming Corp. (BYD), a domestic casino operator with properties in six states, are trading 20% higher today after announcing Q2 financial results and the suspension of plans to begin construction of a huge Las Vegas development that investors feared would strain Boyd’s capital position. The company also announced the authorization of a $100-million share repurchase program.
On the earnings front, Boyd reported net income excluding non-recurring items of $26.4 million, or 30 cents per share, vs. analysts’ estimates of 27 cents per share. Net revenues of $460.8 million were slightly below consensus of $462.9 million. Keith Smith, President and Chief Executive Officer of Boyd Gaming, commented on the results, “During the second quarter, we continued to see the same economic factors at work that were present in the first quarter. Consumers across the nation are faced with rising food and fuel costs, and the housing slump continues to impact consumer confidence. Despite these economic headwinds, our business is still producing significant operating cash flows, and our results are generally in line with our expectations for the quarter. We remain confident in our ability to manage through these difficult economic times and believe we will be prepared to capitalize on growth opportunities when conditions normalize.”
Construction of Boyd’s mammoth $4.8 billion Echelon development on the Las Vegas Strip was put on hold amid fears that the city is saturated with luxury hotels during the current economic slowdown. The Echelon is already partially built, and construction could be halted for three or four quarters until the economy improves or credit concerns ease. Keith Smith added, “The current economic climate is unprecedented in recent years. While we remain enthusiastic about the long-term prospects for the Las Vegas market and Echelon, this is the right decision for our Company at this time. This decision is not a reflection of the merits of the project, nor the accomplishments of our professional development team, but rather the challenges we, and many other businesses, face in today’s uncertain business climate. We remain fully committed to Echelon, and convinced that it will produce long-term, sustainable growth for our Company in the years to come. We look forward to resuming construction as soon as we are able to do so.”
Analysts cheered the Echelon decision. “This is a very prudent, tough decision by management in light of the capital markets, the slowdown in Las Vegas and significant shareholder opposition,” said Joel Simkins of Macquarie Securities. In addition to authorizing a $100 million stock buyback, Boyd’s Board of Directors suspended its quarterly dividend payments of 15 cents per share. Shares of BYD have been pummeled this year. Currently trading 20% higher at $11.90, shares have traded in a 52-week range of $7.90 – $45.50.
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