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TheStreet Open House

Why International Game Technology (IGT) Is Dropping Today

NEW YORK (TheStreet) -- International Game Technology (IGT) fell 13.8% to $15.23 Friday after missing estimates in its earnings report and a downgrade from Sterne Agee.

In its fiscal first-quarter results IGT posted earnings of 25 cents a share and revenue of $541.2 million. Analysts surveyed by Thomson Reuters estimated earnings of 30 cents a share and revenue of $554.6 million in the quarter ending Dec. 31.

In addition to missing analyst estimates, the company said it expects fiscal 2014 earnings to come in at the low end of its guidance range of between $1.28 and $1.38 a share. Analysts are expecting earnings of $1.29 a share for the year.

Following the results, IGT was downgraded by Sterne Agee, getting downgraded to "neutral" from "buy," with a price target of $18.

TheStreet Ratings team rates INTL GAME TECHNOLOGY as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate INTL GAME TECHNOLOGY (IGT) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • IGT's revenue growth has slightly outpaced the industry average of 0.5%. Since the same quarter one year prior, revenues slightly increased by 1.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has slightly increased to $127.40 million or 6.61% when compared to the same quarter last year. In addition, INTL GAME TECHNOLOGY has also modestly surpassed the industry average cash flow growth rate of -0.64%.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market on the basis of return on equity, INTL GAME TECHNOLOGY has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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