IGT Beats on Q2 Earnings, Revs - Analyst Blog

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International Game Technology ( IGT ) reported second-quarter fiscal 2014 earnings (excluding one-time items) of 20 cents per share, which beat the Zacks Consensus Estimate by a penny.

Quarter Details

Revenues decreased 14.5% year over year to $512.8 million but surpassed the Zacks Consensus Estimate of $502.0 million. Product sales and Gaming Operations declined 27.4% and 9.4% year over year, respectively.

Interactive was the only segment that reported growth (up 19.6%) in the quarter. Social revenues increased 26.7% year over year that fully offset an 11.3% decline in IGTi revenues.

Average revenue per unit per day decreased 4.6% from the year-ago quarter to $47.00. Gaming Operations installed base of 53,400 units was down from 56,700 units in the year-ago quarter.  

IGT shipped 7,600 machines during the quarter compared with 14,300 units in the year-ago quarter. Average machine sale price was $14,700 versus $14,100 in the year-ago quarter.

Operating expenses as percentage of revenues increased 670 basis points (bps) from the year-ago quarter to 36.7%. The year-over-year increase was primarily attributed to higher selling, general & administrative (up 570 bps) and research & development expenses (up 170 bps). As a result, operating margin contracted 630 bps from the year-ago quarter to 21.0%.

Net income was $49.4 million or 20 cents per share compared with $95.1 million or 36 cents in the year-ago quarter.

IGT exited the second quarter with cash and investments (including restricted cash) of $432.3 million versus $580.6 million in the previous quarter. Total debt stood at $2.20 billion. During the quarter, IGT paid $27.0 million as dividend.

Guidance

For fiscal 2014, IGT revised its previous earnings guidance range of $1.28 to $1.38 per share to $1.00 to $1.10 per share. Currently, the Zacks Consensus Estimate is pegged at $1.03.

Recommendation

We believe that increasing investment in product development will increase operating costs. Moreover, intensifying competition from the likes of Bally Technologies ( BYI ) and Zynga ( ZNGA ) in its core as well as interactive markets remains a major headwind.

However, the cost savings from the restructuring program ($30.0 million in 2014 and $50.0 million annually) will boost profitability. The expanded partnership with Sony ( SNE ) is a significant positive that will boost the top line.

We believe that innovative product pipeline, growth from cloud-based products in international markets and strong growth from the DoubleDown business will boost IGT's overall growth in 2014. 



BALLY TECH INC (BYI): Free Stock Analysis Report

INTL GAME TECH (IGT): Free Stock Analysis Report

SONY CORP ADR (SNE): Free Stock Analysis Report

ZYNGA INC (ZNGA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: BYI , IGT , SNE , ZNGA

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