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Despite the great quarter, investors fear a repeat of last quarter's conference call.  Low expectations make that outcome unlikely.

Since investors seem to be already expecting lower guidance when BYD holds its noon conference call, playing the other side might be the right strategy.  People probably shouldn't believe any Q2 guidance below the current consensus of $0.10.  We were at $0.12 and that was before BYD lowered its cost structure at a number of properties including Borgata. 

Consistent with our earnings preview, BYD put up a big quarter, beating our Street high EBITDA estimates by over $1m and consensus by $7.5m.  The quarter was high quality as the beat were driven at the property level - $7.6m better than consensus.  Top line was also strong, besting consensus by $7.8m.  EPS “only” exceeded consensus by 2c but a high tax rate and high interest expense cost the company 2-3c.

The regional markets, particularly the Imperial Palace, and Borgata were the standouts.  The newly acquired IP generated EBITDA of $12.7m versus our $9.0m estimate – corroborating management’s assertions of this being a high ROI acquisition.  Heading into the new competition from Revel, Borgata’s margin performance was impressive.  A lower cost structure certainly provides a little more comfort about Borgata’s ability to withstand the additional supply in Atlantic City.  Given the seasonal demand patterns in that market, the real impact from Revel might not be felt until Q4.  Thus, Borgata could continue to exceed consensus quarterly expectations through Q3.