Sterne Agee CRT analyst, David Bain, thinks the guidance offered by Boyd Gaming (NYSE: BYD) is conservative as its core market as a Las Vegas Local implies greater earning power. PT goes to $24 with no change to the Buy rating.

1Q16 shows continued momentum in its most important market – the Las Vegas Locals. LV Locals revenue growth, actual EBITDA and EBITDA margins posted their best results since 2Q06, 1Q09 and 3Q08 – and there is still room to grow with the market still ~20% below peak levels and 3 new high-growth properties folding into BYD’s portfolio in 3Q16.

1Q16 delivered a 3% EBITDA beat – delivering on investor expectations for a small beat – though we believe the manner in which upside delivered was encouraging. LV Locals posted much better than expected top-line growth and the Borgata easily beat expectations (despite a $5m flood impact) with increased market share and efficiencies.

BYD reaffirmed CY16 EBITDA guidance of $635m to $655m, excluding new acquisitions, and raised its growth outlook for its LV Locals segment as well as for the Borgata. Given 1Q16 results and implied forward revenue growth, we view BYD not raising its EBITDA guidance as conservative, though we believe investors have grown (or should be) accustomed to management’s typical conservatism surrounding its forward outlook.

3Q16 addition of both Cannery properties and the Aliante adds significant growth (from both the inclusion and higher than average property growth forecasts) to its LV Locals segment. Post-acquisition LV Locals EBITDA will near 35% of total generated CY17 property EBITDA, boosting the BYD’s valuation multiple as well, in our view.

Company guidance appears conservative and the potential for a guidance raise in the upcoming quarters as fairly strong.

PT goes to $24 from $23.

For an analyst ratings summary and ratings history on Boyd Gaming click here. For more ratings news on Boyd Gaming click here.

Shares of Boyd Gaming closed at $20.62 yesterday.