Bally Technologies impresses Wall Street despite decline in revenues

The Las Vegas-based slot machine maker told investors it cut costs and the slot machines it did sell came with a higher price tag than a year ago.

“Despite a challenging external environment in fiscal year 2009 that pinched casinos’ capital expenditure budgets impacting revenues, Bally was able to achieve peak earnings,” Union Gaming Group’s Bill Lerner said in a report to investors.

Bally reported net income of $33.2 million for the quarter that ended June 30, or 58 cents a share, compared with $31.3 million or 54 cents a shares. Revenues, however, fell to $203.1 million compared with $247.4 million a year ago.

Analysts were willing to look beyond the revenue slide. Bally, they believe, is a gambling equipment provider that will benefit when casinos begin spending money to replace older slot machines down the road.

“The company is well positioned to benefit from the expected improvement in demand over the next several quarters,” Oppenheimer gaming analyst David Katz told investors. “As such, we view the present quarter as less relevant than the positioning for the improving environment and maintain our positive stance on the shares.”

Macquarie Securities gaming analyst Joel Simkins predicted slot makers such as Bally’s will have stronger sales in the second half of 2010 if the economy rebounds and new gambling markets open up.

“The eventual need for operators to update slot product and efforts to spur replacement demand will help to increase replacement units sold from the current trough levels,” Simkins said. “In addition, the expected up tick in systems sales may indicate that operators’ capital budgets are beginning to open up once again, which could translate into strengthening replacement sales.”

Shares of Bally, traded on the New York Stock Exchange, closed at $39.21 Thursday, up $1.60 or 4.25 percent.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.