Boyd Gaming Corp. shares downgraded

Mar 4, 2008 7:00 AM

Earnings by Ray Poirier | A pair of gaming analysts downgraded the shares of Boyd Gaming Corp. (BYD) following the company’s report of a decline in earnings due to a slowing of gaming revenue and growing preopening expenses.

During the fourth quarter that ended on Dec. 31, 2007, the company said net income was $31 million or $0.35 per share compared with $56.6 million or $0.63 per share in 2006.

Net revenues were $478.6 million, down from last year’s $520.8 million.

As for the locals market in Las Vegas, the company said fourth quarter net revenues were $214.4, slightly below last year’s $217.7 million.

A bright spot, the company said, was its Atlantic City operation where the Borgata Hotel/Casino and Spa was able to stay comparable with the previous year despite seeing the entire Atlantic City market fall due to increased competition from additional slots parlors in nearby jurisdictions.

Like other gaming operators, officials of Boyd Gaming warned that "consumers, especially in Las Vegas, are being much more cautious on how they are spending their money."

Dennis Forst of KeyBanc Capital Markets agreed that tightened consumer spending and slowing economic conditions "will likely hurt" casinos that cater to the Las Vegas locals market. He also saw problems developing nationwide because of worsening economic conditions such as rising gas costs.

He advised clients that he was lowering his rating of BYD shares to "underweight" from "hold" and cut his earnings estimate for 2008 to $1.35 per share from the previous $1.45 per share.

Fritz Owens of Calyon Securities Inc. also downgraded the shares to "neutral" from "buy" with a warnings that "Boyd’s Las Vegas locals operations (will) be pressured by a weak housing market and limited room for margin improvement."