So, what have we learned from the first several first-quarter earnings reports released by casino operators?
To start, there’s what we haven’t learned—whether or when inflation will take its toll on U.S. consumer spending.
Las Vegas visitation and gaming revenues continue to recover as consumers release pent-up demand and spend their still-ample hordes of stimulus money and savings built up during the Covid pandemic.
And while various opinion surveys show consumers expressing more caution, their actions so far don’t confirm such concern. Maybe we’ll see a slowing of business later this year or in 2023. Time will tell.
Perhaps what we’ve most learned so far is that regional casino companies are being run competently and are executing prudent growth strategies.
That certainly was evident when Monarch Casino reported record results thanks to the successful opening of its expanded operations in Black Hawk, Colorado.
Then Boyd Gaming reported a sterling first quarter. It smashed last year’s first quarter EBITDAR record, rising 15.8 percent to $338 million on a 14.3 percent rise in revenue.
EBITDAR margin rose to 39.4 percent from 38.8 percent. Earnings per share jumped from 90 cents to $1.40, beating $1.20 analyst consensus.
The company restored a quarterly dividend at 15 cents a share, more than double the pre-pandemic level.
Boyd repurchased 2.1 million shares, and the total outstanding is now down to 109.6 million. And there’s more to come, as the company is committed to buying back $100 million in shares every quarter. Plus it will buy more opportunistically, CEO Keith Smith and CFO Josh Hirshberg said.
Customers are coming back and, despite concerns over the economy, there’s been no change in customer activity through the first three weeks of April.
And even as inflation raises costs in some areas, there will be revenue opportunities in other areas, such staffing up hotels to meet unmet demand, Hirshberg said.
Plus Boyd has so improved its balance sheet that it has flexibility to deal with any decline among consumers, the company said.
Or take Churchill Downs. I used to call the company one of gaming’s best-kept secrets as it operated outside of the Las Vegas limelight.
That isn’t true, anymore, as its now $8 billion in market cap attests.
CEO Bill Carstanjen and his management team continue, like Boyd, to execute a steady growth plan. The company is quietly building its historical horse racing machine empire, making prudent acquisitions and asset sales, and growing the Kentucky Derby into an ever more valuable and remarkable enterprise.
Also reporting was Las Vegas Sands, a $27 billion market cap company in search of a business and awaiting a Macau rebound, meaning investors in the stock are basically betting on the come.
Macau will certainly rebound when China is done battling Covid, but whether it ever fully recovers, no less achieves growth to justify the multi-billion-dollar investments being made there by casino operators, is far from certain. Also uncertain is whether the company will get growth projects elsewhere worth investing from its ample financial resources.
In brief, what we’ve seen early this earnings season is not so much a theme based on inflation and economic concerns as four distinct stories. We expect that will remain true as other casino operators report.
