Credit: Shutterstock photoA month has gone by since the last earnings report for Scientific Games Corp.SGMS . Shares have added about 10.1% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Scientific Games Posts Narrower-than-Expected Q4 Loss
Scientific Gamesreported fourth-quarter 2016 loss of $0.82 per share, which was narrower than the Zacks Consensus Estimate of a loss of $0.91 but wider than the year-ago quarter loss figure of $0.48.
Revenues increased 2.1% from the year-ago quarter to $752.2 million, which was better than the Zacks Consensus Estimate of $745 million. The growth was driven by higher services (up 3.1%) and product sales (up 2.3%), which fully offset weak instant games sales (down 1.1%). Unfavorable foreign currency exchange impacted revenues by $12 million.
Quarter Details
Gaming Segment revenues decreased 1.7% year over year to $460.9 million. The decline was primarily attributed to lower revenues in the gaming operations, machine sales and gaming systems sales, which were down 7.3%, 2.6% and 6.9%, respectively. This was partially offset by 36.6% increase in table products sales. Unfavorable foreign currency exchange impacted revenues by $8 million.
Total installed base of WAP and premium units declined 198 units on a sequential bases. Average daily revenue across the WAP premium and daily fee participation units declined 4% sequentially. During the quarter, the company shipped 9,234 new gaming machines globally. International shipments were up 14% reflecting increases in both replacements and for new casino openings.
Lottery Segment revenues were down 3.9% year over year to $199.7 million. Instant games and services revenues declined 1.1% and 14.5% from the year-ago quarter, partially neutralized by 3.6% increase in product sales. Unfavorable foreign currency exchange impacted revenues by $3 million.
Interactive Group revenues surged 51.9% year over year to $91.6 million driven by robust performance from social gaming and other interactive, which advanced 52% and 51.4%, respectively.
Attributable earnings before interest, taxes, depreciation and amortization (AEBITDA) remained almost flat at $293.5 million. AEBITDA from the Gaming and Lottery Systems declined 1% and 12.7% to $219.1 million and $79.1 million, respectively. Interactive AEBITDA surged almost 46% to $19.7 million.
Balance Sheet & Cash Flow
Scientific Games exited the quarter with $139.8 million as compared with $120.9 million in the previous quarter. The company's long-term debt was $8.07 billion compared with $8 billion as of Dec 31, 2015. The company lowered debt by paying down $17 million.
Cash flow from operations was $76.2 million as compared with $150.9 million in the previous quarter.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been two downward revisions for the current quarter compared to one upward. In the past month, the consensus estimate shifted upward by 6.1% due to these changes.
Scientific Games Corp Price and Consensus
Scientific Games Corp Price and Consensus | Scientific Games Corp Quote
VGM Scores
At this time, Scientific Games' stock has an average Growth Score of 'C', however its Momentum is lagging a bit with a 'D'. However, the stock was allocated also a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than growth investors.
Outlook
While estimates have been broadly trending downward for the stock, the magnitude of these revisions looks promising. Notably, the stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
