Scientific Games Corp. (
reported breakeven results for the fourth quarter of 2011, way
below the Zacks Consensus earnings Estimate of 10 cents. Earnings
in the reported quarter also declined from 3 cents per share in the
Total revenue increased 12.7% year over year to $239.1 million,
primarily driven by strong instant ticket sales, higher sales of
lottery systems and terminals and better-than-expected service
Instant ticket revenues rose 0.6% year over year to $122.3
million, while sales of lottery systems and terminals surged 50.3%
year over year to $22.3 million. Service revenue increased 24.9%
year over year to $94.4 million.
Scientific Games' U.S. instant ticket retail sales increased
8.5% year over year in the quarter. U.S. lottery systems customers'
retail sales climbed 2.7% year over year in the fourth quarter.
China Sports Lottery instant ticket retail sales jumped15.7% year
over year, while instant ticket retail sales in Italy was flat in
the reported quarter.
Segment-wise, Printed Products Group revenues inched up0.8% year
over year to $125.2 million, primarily due to higher contribution
from U.S. customers ($3.8 million), which offset lower sales to
international customers ($3.6 million).
Lottery Systems Group revenues increased 10.0% year over year to
$69.5 million, primarily due to higher sales of software and
hardware to international customers ($2.6 million) and increased
hardware sales in the U.S. ($3.1 million).
Diversified Gaming Group revenues shot up79.7% year over year,
driven by a 42% year-over-year growth in global installed base of
server-based gaming terminals. Incremental revenue from the
Barcrest acquisition ($11.5 million) also boosted growth during the
Attributable EBITDA rose to $80.3 million from $77.7 million in
the year-ago quarter. Joint venture EBITDA was $19.5 million in the
reported quarter compared with $19.3 million in the prior-year
Operating income in the quarter was $18.3 million (including
stock-based compensation but excluding employee termination and
restructuring costs) compared with a loss of $11.0 million
(including stock-based compensation but excluding employee
termination and restructuring costs, write-down of assets held for
sale) in the year-earlier quarter. The increase in operating income
was driven by higher revenues.
Scientific Games exited the quarter with $104.4 million in cash
and cash equivalents compared with $86.9 million in the prior
quarter. Total debt remained flat year over year at $1.39
We believe that the company???s diversified product offerings;
international development activities (China, Italy), recurring
revenue business model and strong growth from the Internet-based
business will drive the stock over the long term.
However, intense competition from
International Game Technology (
and privately held Intralot S.A. and Lottomatica S.p.A, a highly
leveraged balance sheet, lower lottery revenues, loss of contracts
and a slowing trend in the domestic market as well as inChina will
continue to temper near-term results.
We maintain our Neutral recommendation over the long term (6-12
months). Currently, Scientific Games has a Zacks #5 Rank, which
implies a short-term Strong Sell rating.
INTL GAME TECH (
): Free Stock Analysis Report
SCIENTIFIC GAME (
): Free Stock Analysis Report
To read this article on Zacks.com click here.