IGT third-quarter results miss Street forecasts, but shares surge 23 percent

November 15, 2019 4:49 AM
  • Matthew Crowley, CDC Gaming Reports
November 15, 2019 4:49 AM
  • Matthew Crowley, CDC Gaming Reports

Third-quarter gaming machine unit shipments increased 44 percent from a year earlier and draw game revenue ticked 4 percent higher for International Game Technology. But the slot giant fell short of Wall Street forecasts for third-quarter earnings and narrowly missed on revenue.

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Investors, though, were unfazed and sent IGT shares surging more than 23 percent.

In a statement Thursday, London-based IGT, which produces and operates gaming and lottery machines in more than 100 countries, said its adjusted net income was $43 million, or 21 cents per share, for the three months ended Sept. 30, down from $64 million, or 31 cents per share, a year earlier. Adjusted net income filters out one-time costs.

Also, in the quarter, IGT declared a dividend of 20 cents per share, payable Dec. 13, to shareholders of record Nov. 29.

Analysts surveyed by Zacks Investment Research had, on average, expected IGT’s adjusted net income to be 29 cents per share. Zacks noted that IGT’s earnings per share have topped Wall Street forecasts just once in the past four quarters.

Adjusted income before interest, taxes, depreciation and amortization, a cash flow measure that also excludes nonrecurring costs, fell 8.1 percent, to $407 million from $443 million.

Quarterly revenue fell 0.8 percent to $1.15 billion, down from $1.16 billion, and missed the $1.152 billion forecast of Zacks-polled analysts.

Investors apparently liked the results. IGT shares rose $3.03, or 23.49 percent, to close at $15.93 on the New York Stock Exchange.

In an article posted Thursday, The Motley Fool’s Travis Hoium saw two reasons for the stock-price surge. First, that IGT’s management had kept its full-year adjusted EBITDA guidance $1.675 billion to $1.735 billion. Second, IGT management lowered the high end of capital expenditure guidance by $50 million to between $450 million and $500 million.

In a conference call with analysts and journalists, IGT CEO Mario Sala highlighted areas of strong performance. The company has deployed 1,200 GameTouch self-service machines, which dispense instant tickets and games, across 10 states. The machines will get a wider rollout next year and are expected to serve big-box retailers.

Sala added that IGT was chosen to provide lottery technology and instant ticket printing for the new Mississippi lottery and had its extended lottery contracts in Colorado, Minnesota and Kentucky. Beyond the United States, he said, IGT’s 50-50 joint venture earned the 15-year Lotex license in Brazil, the world’s eighth-largest economy.

“Channel expansion is key to driving future lottery revenue growth,” he said, “and that is what these products are all about.”

In segment-by-segment breakdown, IGT beat the Street for North America gaming and interactive revenue ($257 million, topping the $240.9 million consensus forecast), North America lottery revenue ($281 million, topping the $277.7 million forecast), and international lottery revenue ($213 million, topping the $206.5 million forecast). The company missed on Italy lottery revenue ($402 million, short of the $406.8 million forecast).

Follow Matthew Crowley on Twitter @copyjockey