IGT shares battered;
Stations fly high
after quarterly reports

Jan 25, 2005 12:12 PM

International Game Technology (IGT) met expectations for the first fiscal quarter of 2005 but it wasn’t enough to satisfy investors. Following the company’s conference call last week, Wall Street pummeled the company’s shares until they had fallen in value by more than 10%.

That wasn’t the case with Station Casinos Inc. (STN) that reported earnings that beat both last year’s numbers and the projections of most analysts. The report was made on Monday and investors hailed the report by boosting the company’s share price by $2.21 to $58.80 with more than two million shares changing hands, more than four times the normal amount.

The problem with IGT was in its projections for the coming quarters that didn’t sit well with gaming analysts, some of whom were quick to reduce their IGT equity ratings.

For the quarter that ended on Dec. 31, 2004, the company saw revenues climb 5.4% to $641.2 million, while income from continuing operations moved up by 4.9% to $122.4 million. The increases were remarkable, the company noted, since they were achieved in a period that was one week shorter than the comparable year. The missing week cost the reduction of nearly $20 million, the company said.

Helping boost both revenues and income for the period were international sales, especially those that took place in Japan. Through its relationship with Sega Sammy Holdings Inc., the company had record sales of its "Terminator" pachisuro machines.

Revenues from its international product sales reached $172 million, an increase of 84% over last year’s $93.6 million.

Domestic sales were notably down, the company said, primarily because of a slowing demand for ticket-in/ticket out replacement machines.

But it was during the conference call that newly named CEO T.J. Matthews said the company would continue to achieve its 15% five-year annual earnings growth target but would fail to meet projections during the current fiscal year. Analysts said that based on the projection of earnings per share in the $0.30 to $0.35 range, the company would not reach the expected $1.52 per share annual estimate.

It was also noted that although the company’s directors had authorized a share buy-back plan involving 35.8 million shares, the company had not repurchased a single share during the fiscal quarter. There was no indication whether the buy-back plan would be renewed.

In a market atmosphere that had caused the major indices to fall for the first three week of the calendar year, an event not seen since 1982, the IGT report seemed to extend a negative pall over the entire gaming market. Shares of nearly all the major gaming companies fell on both Thursday and Friday of last week.

Stations said that same store revenues for the period that ended on Dec. 31, 2004, increased by 17% over last year’s fourth quarter, marking the fourth consecutive quarter of double-digit same store revenue growth.

Net income for the quarter totaled $38 million, or $0.55 per share but when certain costs were excluded the earnings per share would have been $0.58 compared to last year’s $0.42 per share. Revenues increased to $264.7 million compared to last year’s $229.9 million.

Analysts had forecast revenues of $252.5 and earnings of $0.51 per share.