International Game Technology
(
IGT
) is scheduled to release its fiscal fourth quarter 2012 results
after the closing bell on November 8, 2012.
Prior Quarter Highlights
IGT reported a weaker-than-expected third quarter; wherein
both top line and bottom line missed the Zacks Consensus
Estimates. IGT reported a bottom line of 23 cents a share, which
plunged 65.7% year over year due to higher operating expenses and
margin contractions in the quarter.
However, revenue increased 9% year over year to $532.8
million, primarily driven by higher North America product sales
and interactive businesses.
For the fourth quarter, IGT expects Gaming operations gross
margin to be approximately 62%. Product sales gross margin is
expected to be 52% for the fourth quarter of 2012.
For further details please read:
Higher Costs Spoil IGT's 3Q
Estimate Revision Trend
In the last 30 days, only one upward revision was noticed.
However, a downward revision fully offset the positive effect.
Hence, the Zacks Consensus Estimate for the quarter remained at
32 cents per share for the same period of time.
Analysts expect IGT's top line to be positively impacted by
higher number of Canadian Video lottery terminal ("VLT")
replacement sales and lower number of shares outstanding to
benefit the bottom line. Analysts also expect the Gaming
operations revenues to improve slightly. Moreover, analysts
expect decent performance from its DoubleDown interactive gaming
segment. However, analysts remain cautious about IGT's declining
margins due to the shift to low-yielding units.
Recommendation
We note that IGT has a negative average earnings surprise of
7.06% over the past four quarters. We believe that increasing
investment in product development will drive operating costs
going forward. This will remain an overhang on the stock in the
near term. Moreover, fewer new openings and increased competition
from
Bally Technologies Inc.
(
BYI
) and
WMS Industries Inc.
(
WMS
) will keep the stock range bound in the near term.
However, IGT has an impressive product portfolio. In addition,
its cost-cutting initiatives, lesser dependence on the domestic
machine replacement cycle and new contract wins are the positives
for the company going forward. IGT's strong growth potential of
its interactive gaming segment could act also as a positive
catalyst in the long term.
We have a Neutral recommendation on the stock over the long
term (6-12 months). Currently, IGT carries a Zacks #3 Rank, which
implies a 'Hold' rating in the short term.
BALLY TECH INC (BYI): Free Stock Analysis
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INTL GAME TECH (IGT): Free Stock Analysis
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WMS INDS INC (WMS): Free Stock Analysis
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