Regional Casino Operator Boyd Gaming Reports Weak Second-Quarter Results

Boyd Gaming BYD reported weak second-quarter results that were slightly below our expectations. Net revenue decreased by 1% in the second quarter, with all of the company's operating segments performing poorly. Revenue for the company's Las Vegas locals casinos decreased by 1%, as the Las Vegas market continued to suffer from double-digit unemployment and a depressed housing market. Revenue at Midwest and South casinos was flat at $182 million, as Boyd's middle class and lower-income consumers in both regions continued to be constrained by high unemployment and high gas prices. The company's Borgata casino in Atlantic City continued its descent, with revenue declining 2% to $183 million, and adjusted EBITDA declining 10% to $39 million. The Atlantic City market has been devastated by increased competition from new casinos in states outside New Jersey, and we do not expect competitive pressures to abate anytime soon. Slot machines are expected to be introduced at the Aqueduct race track this year in New York City, a key feeder market for Atlantic City, and we expect Revel, a large casino in Atlantic City, to open next year and take significant market share from Borgata. The only operating segment that generated growth in the quarter was Boyd's downtown Las Vegas casinos, which generated revenue growth of 2.5%.