Why Boyd Gaming (BYD) Was Upgraded

NEW YORK (TheStreet) -- Boyd Gaming (BYD) was upgraded to "outperform" from "market perform" by FBR Capital Markets Thursday.

Boy Gaming gained 6.9% to $10.40.

The firm raised its price target for the company to $11.35 from $10.40. The upgrade is due to the company's efforts to cut costs and possible better results in Las Vegas.

Analyst Jake Fuller wrote, "Key planks to the bull case include: (1) debt reduction has driven a notable improvement in free cash flow through interest savings; (2) easier regional comps and signs of life in Vegas point to EBITDA growth in 2014; (3) bad luck and weather hit Borgata in 4Q, but property tax savings, reduced market capacity, and online gaming should yield a better 2014; and (4) the risk-reward is skewing to the positive on the recent sell-off."

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Separately, TheStreet Ratings team rates BOYD GAMING CORP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate BOYD GAMING CORP (BYD) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 3.4%. Since the same quarter one year prior, revenues rose by 20.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, BYD's share price has jumped by 43.32%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • 38.89% is the gross profit margin for BOYD GAMING CORP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -5.04% is in-line with the industry average.
  • The debt-to-equity ratio is very high at 8.52 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, BYD has a quick ratio of 0.53, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, BOYD GAMING CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: BYD Ratings Report

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