IGT reports slight drop in profits

Slot machine giant International Game Technology experienced a slight decrease in profits during the first quarter, but the Reno-based company said it expects better results as the year progresses.

IGT is still considered the gaming industry's leading slot machine provider with some 60 percent of the overall market. Company officials said Thursday its net income for the quarter ended Dec. 31 was $73 million, or 25 cents per share. A year ago, the company reported net income of $75 million, or 26 cents a share.

Analysts polled by FactSet Research expected IGT to earn 20 cents a share in the quarter.

Revenues fell 9.7 percent to $465 million from $515 million.

IGT Chief Executive Officer Patti Hart said the company's efforts to cut internal costs and improve operational strategies over the past two years have taken hold.

Slot machine sales fell 14 percent in the first quarter, due in large part to fewer international openings and expansions in the previous year. IGT did benefit from sales revenue deferred from the previous quarter on slot machines placed at the new SugarHouse in Philadelphia and The Cosmopolitan of Las Vegas.

"Based on early customer feedback, we are confident that our recently released games are gaining momentum," Hart said. "We look forward to better demonstrating our top-line focused initiatives in the second half of this year and beyond."

Macquarie Securities gaming analyst Chad Beynon said most of the slot machines and gambling products IGT displayed during November's Global Gaming Expo in Las Vegas won't hit casino floors until the third or fourth quarters of this year.

Casino operators, Beynon said, are still holding back on ordering new casino equipment despite recent gaming revenue improvements.

"Demand at G2E appeared to exceed expectations," Beynon said. "We continue to expect tepid replacement orders from the operators based on our channel checks."

IGT's quarterly results were helped by certain tax benefits and gains on the sale of its equity investment in a Chinese lottery company, which, combined, amounted to a profit of 4 cents per share.

The company announced earnings after the stock markets closed Thursday. Shares of IGT, traded on the New York Stock Exchange, closed at $18.32, down 8 cents, or 0.43 percent.

Roth Capital Markets gaming analyst Todd Eilers said before the company reported quarterly results that he believed in IGT's turnaround efforts.

However, he doesn't expect the bulk of the rebound to take place until 2012.

"We believe (IGT) stock is fairly valued at current levels and reflects a successful turnaround," Eilers said.

A week ago, JP Morgan gaming analyst Joe Greff downgraded IGT shares to neutral from overweight.

On Wednesday he told investors not to expect much from IGT in the first quarter. Greff said, however, he thought investor sentiment improved for IGT and the gaming equipment sector in general over the last few months.

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