Scientific Games (SGMS) Posts Wider-than-Expected Q1 Loss

Scientific Games Corp. (NASDAQ:SGMS) reported first-quarter 2017 loss of 92 cents per share, which was wider than the Zacks Consensus Estimate of a loss of 74 cents but narrower than the year-ago quarter loss figure of $1.07.

Driven by growth across board, revenues increased 6.4% from the year-ago quarter to $725.4 million, which was better than the Zacks Consensus Estimate of $711.5 million. However, unfavorable foreign currency exchange impacted revenues by $8.1 million.

We note that Scientific Games has outperformed the Zacks Computer Services industry in the last year. While the stock returned 134.02%, the industry gained 13.07% in the same time.

Quarter Details

Gaming Segment revenues increased 4.3% year over year to $440 million. The increase was primarily attributed to growth in machine sales, gaming systems sales and table products by 16.1%, 3% and 15.8%, respectively, partly offset by lower revenues in gaming operations (down 6.5%). Unfavorable foreign currency exchange also impacted revenues by $5.1 million.

During the quarter, the company shipped 5,862 new gaming machines globally. International shipments were up 5%, reflecting increases in both replacements and new casino openings.

Lottery Segment revenues were up 0.7% year over year to $189.1 million. Instant games revenues grew 4.5% whereas Services’ revenues declined 13.5% from the year-ago quarter. Product Sales grew 16.5%. Unfavorable foreign currency exchange impacted revenues by $2 million.

Interactive Group revenues surged 32.6% year over year to $96.3 million, driven by robust performance from social gaming and other interactive, which advanced 33.2% and 29.8%, respectively.

Attributable earnings before interest, taxes, depreciation and amortization (AEBITDA) increased 10.7% to $286.6 million. AEBITDA from the Gaming and Lottery Systems declined 9.7% and 4.7% to $209.7 million and $85.3 million, respectively. Interactive AEBITDA surged almost 49.4% to $23 million.

Balance Sheet & Cash Flow

Scientific Games exited the quarter with $131.9 million compared with $115.1 million in the previous quarter. The company’s long-term debt was $8.07 billion compared with $8.02 billion as of Dec 31, 2016. The company lowered debt by paying down $45 million.

Cash flow from operations was $110 million compared with $101.1 million in the previous year quarter.

Zacks Rank & Stocks to Consider

Currently, Scientific Games carries a Zacks Rank #3 (Hold). Better-ranked stocks are Ebix, Inc. (NASDAQ:EBIX) , LogMeIn, Inc. (NASDAQ:LOGM) and Hasbro (NASDAQ:HAS) in the broader sector. While Ebix and LogMeln sport a Zacks Rank #1 (Strong Buy), Hasbro carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the trailing four quarters, Ebix, LogMeIn and Hasbro have yielded positive average earnings surprises of 14.38%, 38.99% and 16.54%, respectively.

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