Scientific Games Earnings: A Return to Profitability

Scientific Games Corp (NASDAQ:SGMS) climbed to a profit in the first quarter, but still came up short of analyst expectations. Scientific Games is a supplier of technology-based products, systems and services to gaming markets worldwide.

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Scientific Games Earnings Cheat Sheet for the First Quarter

Results: Reported a profit of $1.8 million (2 cents per diluted share) in the quarter. Scientific Games Corp had a net loss of $6.9 million or a loss 8 cents per share in the year-earlier quarter.

Revenue: Rose 19.3% to $234.6 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Scientific Games Corp fell short of the mean analyst estimate of 5 cents per share. It beat the average revenue estimate of $228.1 million.

Quoting Management: “U.S. lottery retail sales growth levels in the first quarter of 2012 were among the highest that the industry has experienced. This robust growth was driven by a variety of progressive measures, including lottery private management, prize payout increases, and the introduction of tiered pricing for national jackpot games. Additionally, the advantages of private management have been illustrated by the strong performance of the Illinois Lottery,” Chairman and Chief Executive Officer A. Lorne Weil commented. “I believe these types of progressive measures can continue to drive growth for the lottery industry in 2012 and, more importantly, should lead to opportunities with additional U.S. and international customers, supporting industry growth well into the future.”

Key Stats:

Revenue has now increased for three consecutive quarters. In the fourth quarter of the last fiscal year, revenue rose 12.7% to $239.1 million while the figure rose 0.8% in the third quarter of the last fiscal year from the year earlier.

The company has fallen short of estimates for two consecutive quarters. In the fourth quarter of the last fiscal year, it missed expectations by 13 cents with a loss of 3 cents versus a mean estimate of net income of 10 cents per share.

SGMS’ profit in the latest quarter follows losses in the previous two quarters. The company reported a net loss of $8.5 million in the fourth quarter of the last fiscal year and a loss of $4.1 million in the third quarter of the last fiscal year.

Gross margins grew 0.3 percentage point to 43.4%. The growth seemed to be driven by increased revenue, as the figure rose 19.3% from the year-earlier quarter, while costs rose 18.7%.

Looking Forward: The outlook for the company’s results in the upcoming quarter is unfavorable. The average estimate for the second quarter is 13 cents per share, down from 15 cents ninety days ago. At 41 cents per share, the average estimate for the fiscal year has fallen from 48 cents ninety days ago.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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