What's In Store For Scientific Games (SGMS) In Q2 Earnings?

Scientific Games Corporation (NASDAQ:SGMS) is expected to report second-quarter 2016 results on Aug 5. Last quarter, it posted a negative earnings surprise of 5.94%. Scientific Games has posted positive earnings surprises in three of the trailing four quarters, resulting in an average positive earnings surprise of 23.39%.

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.

Scientific Games' business has been impacted because of the 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 -29.27%. This is because the Most Accurate estimate stands at a loss of $1.06 whereas the Zacks Consensus Estimate stands at a loss of 82 cents.

Zacks Rank: Scientific Games has a Zacks Rank #4 (Sell). 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 momentum.

SCIENTIFIC GAME Price and EPS Surprise

SCIENTIFIC GAME Price and EPS Surprise | SCIENTIFIC GAME Quote

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:

Analog Devices, Inc. (NASDAQ:ADI) has an Earnings ESP of +2.63% and a Zacks Rank #2.

CenturyLink, Inc. (NYSE:CTL) has an Earnings ESP of +5.08% and a Zacks Rank #2.

Exelon Corporation (NYSE:EXC) has an Earnings ESP of +1.79% and a Zacks Rank #3.