Gaming and hospitality company Boyd Gaming (NYSE:BYD) reported results in line with analysts' expectations in Q1 CY2024, with revenue flat year on year at $960.5 million. It made a non-GAAP profit of $1.51 per share, down from its profit of $1.71 per share in the same quarter last year.

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Keith Smith, President and Chief Executive Officer of Boyd Gaming, said: “After a record 2023, the first quarter of 2024 was a challenging start to the year. Severe winter weather had a significant impact on our Midwest & South segment early in the quarter while we also experienced increased competitive pressures in the Las Vegas Locals market. However, throughout our business, many of the positive trends from the fourth quarter continued into the new year. By focusing on our disciplined operating and marketing strategies, we have been able to maintain strong operating margins. Additionally, our significant cash flows and strong balance sheet allow us to continue returning capital to our shareholders through our ongoing share repurchases and quarterly dividend programs. Looking ahead, we remain confident in our ability to successfully navigate the current environment and deliver value to our shareholders.”

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

Reviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Boyd Gaming's annualized revenue growth rate of 5.6% over the last five years was weak for a consumer discretionary business. Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. Boyd Gaming's recent history shows the business has slowed as its annualized revenue growth of 3.6% over the last two years is below its five-year trend.

We can dig even further into 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 3.1% year-on-year declines. This segment has lagged the company's overall sales.

This quarter, Boyd Gaming's $960.5 million of revenue was flat year on year and in line with Wall Street's estimates. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months.

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Operating Margin

Operating margin is an important measure of profitability. It’s the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. Operating margin is also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Boyd Gaming has been a well-oiled machine over the last two years. It's demonstrated elite profitability for a consumer discretionary business, boasting an average operating margin of 25%.

This quarter, Boyd Gaming generated an operating profit margin of 22.8%, down 6.7 percentage points year on year.

Over the next 12 months, Wall Street expects Boyd Gaming to become more profitable. Analysts are expecting the company’s LTM operating margin of 22.4% to rise to 24.9%.

Key Takeaways from Boyd Gaming's Q1 Results

We struggled to find many strong positives in these results. Its Gaming revenue unfortunately missed and its EPS fell short of Wall Street's estimates. When explaining the results, management noted it experienced increased competitive pressures in its Las Vegas Locals market. Pedestrian traffic in downtown Las Vegas was also down.

A silver lining was that the company's new Sky River Casino, which opened 18 months ago in Northern California, is growing nicely. Overall, this was a mixed quarter for Boyd Gaming and the market is penalizing it for the shaky commentary. The company is down 7.7% on the results and currently trades at $58.01 per share.

Boyd Gaming may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.