Deutsche Bank downgraded Boyd Gaming (BYD) to hold from buy.
Analyst Marc Falcone says Boyd tied soft third-quarter results to its Par-A-Dice and Stardust properties, but he suspects the new Borgata casino in Atlantic City will also post a very soft margin for the third quarter, even below his previous 12% estimate. Falcone thinks Borgata is clearly putting up revenue numbers, but is spending heavily on promotions and is running inefficiently.
Falcone cut the 94 cents 2003 earnings per share estimate to 86 cents, and trimmed the $1.30 2004 estimate to $1.19. He thinks Boyd is going to tread water -- at best -- for some time until management can regain investors' confidence, get Borgata's cost structure in line, and demonstrate improved results at core properties.