Fourth quarter and fiscal 2015 results reported last week by leading slot manufacturer International Game Technology Plc. garnered positive response from stock analysts, who noted that the company beat projections on earnings and EBITDA.
IGT reported adjusted EBITDA of $449 million for the fourth quarter, up 40 percent year-on-year. David Katz of Telsey Group, in issuing an “Outperform” rating on IGT stock, noted that the quarter beat Telsey Group’s estimate of $350 million. For the year, adjusted EBITDA was $1.7 billion, at the high end of Telsey’s guidance range to investors.
Net revenue for the year was $1.365 billion, up 44 percent over the previous year. Telsey had issued an expectation of $1.25 billion. Earnings per share were 63 cents, compared to the firm’s estimate of 41 percent and a consensus estimate of 40 cents.
“IGT continues to progress in its integration plans while demonstrating its ability to meet or exceed expectations,” Katz wrote. “While the story is not yet ready to generate top-line growth, we expect the value creation to occur through cash flow and deleveraging over time.
“We look for management to provide additional context on its previously announced consortium to bid on the Italian lotto contract and the associated capital spending, as well as the overall capital spending, which are higher than we expected.”
Gaming equipment revenue was $236 million for the quarter, “higher than our forecast of $152 million on higher-than-expected unit sales,” Katz wrote.
The company reiterated its announcement of March 16 that it has formed a consortium to bid on the Italian lotto contract, in which it would own a 61.5 percent interest. “We view incremental news in this regard positive,” wrote Katz, “although management indicated its capital spend in 2016 for this contract would be $660M, which is higher than we expected for their partial ownership. Over time, we expect management to provide additional context on the consortium and the timeline moving forward for the contract.”
Meanwhile, David Bain of Stern Agee CRT Equity Research issued a “Neutral” rating on IGT stock, with a price target of $16. “Higher-than-consensus results were partially led by North American new casino unit sales (2,191 versus our 550 estimate) and international unit sales of 4,516 units versus our estimate or 2,671,” Bain wrote in an investor note.
Bain’s report also noted that IGT sales topped its biggest rival, Scientific Games Corporation.
