International Game Technology ( IGT ) reported fourth-quarter fiscal 2014 adjusted earnings of 37 cents per share, which beat the Zacks Consensus Estimate and improved from the year-ago earnings of 30 cents.
In the fourth quarter, revenues decreased 15.2% year over year to $536.5 million but surpassed the Zacks Consensus Estimate of $523 million. Gaming Operations and Product sales declined 12.6% and 25.1% year over year, respectively. Interactive was the only segment to reports revenue growth of 18.8% year over year to $86.7 million.
For fiscal 2014, revenues dropped 12% year over year to $2.1 billion, owing to a plunge in gaming operations (10.5% year over year) and Product sales (21.9% year over year) offset by increase in social gaming revenues (22.3% year over year).
Average revenue per unit per day decreased 1% from the year-ago quarter to $48.39.
Adjusted operating expenses decreased 17% year over year in the fourth quarter, owing to significant decline selling, general & administrative (18% year over year) and research & development (16% year over year) expenses. As a result, operating ratio (adjusted operating expenses as a percentage of revenue) contracted 100 basis points (bps) from the year-ago quarter to 32%.
IGT exited fiscal 2014 with cash and investments of $314.4 million versus $809.1 million in fiscal 2013. Contractual debt obligations declined 15% year over year to $1.8 billion. During fiscal 2014, IGT returned $319 million in the form of dividends and through share repurchases.
Given the company's prospective takeover by GTECH S.p.A, it has not issued any outlook for fiscal 2015. It expects the acquisition to be completed in the first half of calendar 2015.
We believe that increasing investment in product development will hurt profitability. 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, cost savings from the restructuring program have helped the company lower its operating cost. In addition, the extended partnership with Sony ( SNE ) is a key driver that will drive the top line.
IGT currently has a Zacks Rank #3 (Hold).
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