Scientific Games (SGMS) Q3 Earnings: What's In The Cards?

Scientific Games Corporation (NASDAQ:SGMS) is expected to report third-quarter 2016 results on Nov 3. Last quarter, it posted a negative earnings surprise of 28.05%. Scientific Games has posted positive earnings surprises in three of the trailing four quarters, resulting in an average positive earnings surprise of 27.11%.

Let’s see how things are shaping up for this announcement.

Factors at Play

Scientific Games’ premium position in the gaming equipment space along with a robust product line and a recovering financial position are significant positives. Also, we are optimistic about the company’s ongoing cost cutting initiatives. Bally Technologies and WMS Industries acquisitions are positives for the company as they diversify its product portfolio and expand its global footprint.

In Sep 2016, the company launched its novel lottery gaming system for the Arizona Lottery. In addition, Scientific Games had declared that it’s gaming subsidiaries like Dragonplay Ltd. and Phantom EFX are being reorganized as unrestricted subsidiaries under its debt agreements in order to drive growth.

Another notable activity in the third quarter was the appointment of Kevin M. Sheehan as its CEO and President.

Scientific Games' business has been impacted by weakness in the gaming segment, especially with regard to WAP, premium installed base and gaming systems. Also, the acquisitions put Scientific Games’ balance sheet under pressure as the company opted for debt financing for the buyout. Further, significant competition continues to be a major concern.

Earnings Whispers

Our proven model does not conclusively show that Scientific Games is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Scientific Games has an Earnings ESP of -44.44%. This is because the Most Accurate estimate stands at a loss of $1.30 whereas the Zacks Consensus Estimate stands at a loss of 90 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Scientific Games has a Zacks Rank #3. Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s negative ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some stocks that, as per our model, have the right combination of elements to post an earnings beat this quarter:

Stratasys Ltd. (NASDAQ:SSYS) with an Earnings ESP of +41.67% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

EVINE Live Inc. (NASDAQ:EVLV) with an Earnings ESP of +25.00% and a Zacks Rank #1

Asure Software Inc. (NASDAQ:ASUR) , with an Earnings ESP of +14.29% and a Zacks Rank #2.

SCIENTIFIC GAME Price, Consensus and EPS Surprise

SCIENTIFIC GAME Price, Consensus and EPS Surprise | SCIENTIFIC GAME Quote

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>