Gaming Companies Seeing Value In Share Repurchase Programs

Written By Nicholaus Garcia on May 25, 2022
Stock Buyback Program Is A US Trend Being Picked Up By Gaming Companies

Gaming companies are dipping into the stock repurchasing craze currently moving through Wall Street. 

According to Roth Capital analyst Edward Engel, more gaming companies have announced buyback plans in the past nine months than any period in the past decade.

Seeing value in stock buybacks

During their first-quarter earnings calls, companies like Light & Wonder ($LNW) and MGM Resorts International ($MGM) announced stock repurchase plans. 

“Among US-listed companies, 12 gaming operators/suppliers authorized repurchase plans since August 2021, including a flurry of announcements this month,” Engel said. 

The coronavirus pandemic forced many companies to halt dividend payments to conserve capital. As the industry begins inching toward its former glory, some companies have instituted buyback plans seeing value in their stock. 

Howard Silverblatt, a senior index analyst at S&P Down Jones Indices, had this to say:

“As prices have declined, those purchases should result in a tailwind for [earnings per share]. You have some bargain hunting here.”

Other companies following the buyback trend

But casino companies are not the only ones implementing stock repurchase plans. 

According to the Wall Street Journal, buyback activity is expected to hit a record $1 trillion in 2022. Data from the S&P Dow Jones Indices shows that S&P 500 companies that have reported first-quarter earnings spent $269 billion on buybacks, up 58% from the same period last year. 

Looking at operators with deep connections to Las Vegas, Boyd Gaming ($BYD) and Red Rock Resorts ($RRR) have a combined total of $269 million left on buyback programs. 

Others with substantial money left on buyback plans include:

  • Churchill Downs – $421 million remaining
  • Bally’s Corporation – $335 million remaining
  • Penn National Gaming – $600 million remaining
  • Light & Wonder – $700 million remaining

There have been a number of factors like rising interest rates, the war in Ukraine, and slow economic growth that has contributed to a decline of the US economy. Since the beginning of the year, US business share prices have declined between 15-30%.

However, there are some who view share repurchase plans as a last resort.

Greg Milano, chief executive of Fortuna Advisors, told the WSJ,

“A large chunk of buybacks are done by companies that shouldn’t do them.”

Milano continued:

“Companies should consider buybacks after investing in their business, increasing dividends and paying down debt.”

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Nicholaus Garcia

Nick has had stints in Chicago and Washington, D.C., writing about politics, financial markets, and sports betting. He graduated from Texas Tech University and completed his master's degree in journalism at Columbia College Chicago.

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