Earnings: IGT Profits Dip, Top Target - Monday 6th of February 2006
LAS VEGAS Slot machine giant International Game Technology reported both reduced earnings and revenue in its first quarter of 2006, but the Reno-based manufacturer was Wall Street's darling Thursday.
IGT, which ended its three-month reporting period on Dec. 31, was one of the New York Stock Exchange's most actively traded issues after the company's earnings per share easily beat analysts estimates.
Even though the company's quarterly earnings were $120.6 million, down 1.4 percent from $122.4 million in the first quarter of 2005, IGT said its earnings per share was 34 cents, up a penny from a year ago and above the 27 cents per share estimate of analysts polled by Thomson First Call.
Investors reacted positively to the news. More than 22 million IGT shares changed hands, making the company the 11th-most actively traded issue on the exchange. IGT closed at $35.32, up $3.27 or 10.24 percent. The closing price was IGT's highest total in more than a year.
"IGT reported much stronger than expected fiscal first-quarter results," Bear Stearns gaming analyst Joe Greff said in a note to investors. "Overall, (it was) a solid quarter."
Greff said the upward movement in IGT's stock price was the result of the company beating the earnings per share estimate and the "solid trends in its gaming operations."
IGT reported that revenue from product sales during the quarter was $324.5 million, an 8 percent drop from $354.3 million a year ago. Overall revenue was $616.2 million, down 4 percent from $641.2 million a year earlier.
Wall Street analysts, however, thought the company would report $562.3 million in total revenue during the quarter.
IGT sold 29,100 slot machines worldwide in the quarter, down from 55,300 last year. The average revenue per unit jumped from $6,400 to more than $11,000.
Still, despite what was seemingly bad news, IGT hung tough with Wall Street.
"Once again (IGT) showed that the domestic slot market continues to be challenged," Goldman Sachs gaming analyst Steven Kent said in note to investors. "But (the results) also demonstrated IGT's resiliency, as the company managed to offset the weakness in slot sales through substantial increases in systems revenues."
IGT told gaming analysts and investors during its premarket-opening conference call that higher-margin system revenues, cost reductions and more favorable interest rates contributed to the company's quarter.
"We're very proud of the company's performance in the quarter," IGT Chairman TJ Matthews said during the conference call. "Year-over-year, our installed base of recurring revenue machines increased 6,300 units, with growth in both the North America and international markets. Product sales were strong in several international markets."
Matthews said the company had several successes in the quarter; 2,400 IGT machines comprised 100 percent of the slot floor at the recently opened South Coast, and the company is providing games to the Oregon lottery. IGT also sold games to the hurricane-damaged Palace and Imperial Palace casinos in Biloxi, Miss., which reopened in December.
"While visibility to North America machine sales remains limited, we continue to effectively execute on our strategy to grow our international business, increase the installed base and efficiency of our gaming operations business, and expand the contribution from nonmachine product sales," Matthews said.
Matthews said IGT is beginning to experiment with its server-based gaming system product, which allows casinos to switch out games and content on their slot machine floor through a central computer.
He said a test run is being conducted at the Barona Casino in San Diego and at Treasure Island. Each property has 20 machines connected to a server, giving IGT and the casino operators an idea of how the system will function.
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