Scientific GamesSGMS recently announced that Washington Lottery will continue availing the company's offerings like instant games, services and licensed brands.
Scientific Games, which designs and produces instant games for Washington Lottery, will continue to provide the service till March 2024. Additionally, the company will introduce a loyalty program and design a new mobile app.
This apart, the company announced other deal extensions in the past few months, which are expected to drive the top line.
Contract Wins: A Key Catalyst
This August, Louisiana Lottery Corporation extended its contract with Scientific Games for the next five years.
Also, Kentucky Lottery Corporation extended its deal with Scientific Games for the next eight years in April 2018. Apart from incorporating Cooperative Services Program ("CSP"), the company will provide strategic planning to this lottery company. The CSP program will help Kentucky Lottery to manage supply chain efficiently across its network of 3,000 retailers.
Notably, revenues from the Lottery Segment (24.5% of total revenues) increased 24% from the prior-year quarter number to $207.1 million in the last reported quarter.
With back to back contract wins it is evident that Scientific Games is making efforts to deliver customizable products and services to its customers, which in turn, should add to its top line.
Scientific Games Corp Revenue (TTM)
Acquisitions Strengthen Portfolio Offerings
Moreover, strategic acquisitions have been a key growth driver for Scientific Games over the years.
In this context, the company's latest acquisition of EsysnetG in February is worth mentioning. This buyout enables Scientific Games to cash in on the mobile as well as online games, thereby helping it grow internationally.
In January, Scientific Games also completed the acquisition of Tech Art - supplier of blackjack hole-card readers. This transaction expands the company's gaming portfolio by adding table games namely Super Fun 21 and Bet the Bust as well as strengthening its foothold in the international market with Tech Art's MAXTime 4H.
In the same month, the company acquired Canada-based NYX Gaming Group (NYX) as well. This acquisition will enable Scientific Games to broaden its product pipeline in digital gaming and online lottery markets.
We believe that the company will continue to pursue accretive acquisitions moving ahead, which should boost its market share and customer base.
However, Scientific Games is dependent on renewal of long-term contracts, so the loss of a single contract - either due to a competitor or for any other reason - would significantly affect revenues.
Moreover, adding more debt for funding acquisitions will further enhance its indebtedness and weigh on its profitability.
Zacks Rank & Key Picks
Scientific Games currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the broader technology sector are Paycom Software PAYC , Woodward WWD and AT & T T . While Paycom and Woodward sport a Zacks Rank #1 (Strong Buy), AT & T carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Long-term earnings growth for Paycom, Woodward and AT & T is projected to be 26%, 12% and 4%, respectively.
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