• Fri. Sep 24th, 2021

Scientific Video games Soars on Earnings Beat, Analyst Sees Vital Upside


Aug 10, 2021

Posted on: August 9, 2021, 12:12h. 
Final up to date on: August 9, 2021, 01:05h.

Todd Shriber Learn Extra

Scientific Video games (NASDAQ:SGMS) inventory is hovering Monday. That’s after the gaming expertise supplier delivered second-quarter outcomes that soundly topped Wall Road estimates.

Slot machines manufactured by Scientific Video games on show above. The corporate’s second-quarter earnings trounced estimates. (Picture: Twitter)

The corporate earned $1.10 a share on income of $880 million, simply beating the Zacks consensus estimate calling for earnings per share of 9 cents. That gross sales determine beat Wall Road forecasts by 14 p.c. Adjusted earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA) of $383 blew previous analysts’ estimate of $280 million, buoyed by energy within the firm’s gaming operations division and worldwide markets.

Particularly, Gaming Ops meaningfully outpaced expectations, with SGMS’s worldwide yields exhibiting step perform progress throughout the quarter. Slot shipments additionally look like gaining momentum, which has been a key theme this earnings season,” stated Stifel analyst Jeffrey Stantial in a notice to shoppers right this moment.

The analyst has a “purchase” ranking on Scientific Video games inventory, with an $84 worth goal. Even when accounting for right this moment’s greater than eight p.c rally within the inventory, that projection implies upside of greater than 21 p.c from present ranges.
Catalysts for Scientific Video games Inventory
In late June, Scientific Video games stated it’s planning to divest its lottery administration and sports activities wagering items to boost money and cut back debt.

The corporate says it’s “nicely progressed” on these transactions, although it didn’t additional elaborate. When the plans have been introduced in June, Scientific Video games stated the divestments of these items might are available in a number of methods. These embody an preliminary public providing (IPO), a merger with a particular function acquisition firm (SPAC), an outright sale, or a mix with one other entity.

One other space the place the Las Vegas-based on the spot lottery supplier is probably going drawing adulation from buyers is leverage discount. Scientific Video games stated leverage stood at 7.2x on the finish of the June quarter, down dramatically from 10.5x in the beginning of the yr.
“SGMS ended the quarter with ~$8.2 billion of internet debt, down -$325 million year-over-year,” stated Stifel’s Stantial. “This equates to 7.2x internet debt/trailing 12 months adjusted EBITDA, or 6.1x over 2019A adjusted EBITDA. SGMS paid down $150 million on the SGI revolver throughout Q2, with one other $150 million cost subsequent to quarter-end.”
SciPlay Replace
Final month, Scientific Video games supplied to accumulate the 19 p.c of social on line casino developer SciPlay Corp. (NASDAQ:SCPL) it doesn’t already personal at an 11 p.c premium.
The suitor says that supply stays on the desk, and it highlighted SciPlay’s second-quarter income of $154 million — good for that firm’s second-best quarter on report.
Scientific Video games stated its total digital gross sales jumped 27 p.c, helped by energy in its iGaming enterprise. That underscores why the corporate desires to buy SciPlay and shed its lottery and sports activities betting items so it could focus extra on on-line alternatives.

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