Scientific Games Corporation (SGMS): New Analyst Report from Zacks Equity …

Summary:
Scientific Games reported mixed third-quarter 2013 results, with earnings exceeding the Zacks Consensus Estimate, while revenues lagging the same. We believe the company will continue to face macroeconomic headwinds in the near term. Moreover, intensifying competition and resulting pricing pressure is a major concern, going forward. However, we believe the company’s innovative product pipeline, increasing exposure to casino-style online gaming and massive international expansion opportunities are the positives. Moreover, the WMS acquisition will provide significant traction in the gaming hardware and the related cost synergies will boost profitability in 2014. Thus, we have a Neutral recommendation on Scientific Games and set a price target of $14.00.

Overview:

Based in New York City and incorporated in 1984, Scientific Games Corporation is a global information technology (IT) systems and services company. The company provides instant ticket and online lottery products as well as systems and services to lottery authorities and gaming markets worldwide.

Scientific Games reported revenue of $878.7 million in fiscal 2012. The company earned 51.6% of this revenue from outside United States. The company operates its business under three operating segments Printed Products (57.2% of total revenue in fiscal 2012), Lottery Systems (27.6% of total revenue in fiscal 2012) and Gaming (15.2% of total revenue in fiscal 2012).

The Printed Products group sells instant lottery tickets and related services such as designing and manufacturing of tickets and paper-based prepaid phone cards to approximately 50 countries. Scientific Games is a leading provider of instant lottery tickets and its customers include 41 of the 44 U.S. jurisdictions that currently sell instant lottery tickets. Other value-added services provided by the segment include game design, sales and marketing support, specialty games and promotions, inventory management, and warehousing and fulfillment services.

The Lottery Systems group comprises the online lottery business. The group provides customized computer software, equipment and data communication services to government-sponsored and privately operated lotteries. The company operates online lottery systems in 11 of the 45 U.S. jurisdictions that operate online lotteries making it the second largest online lottery provider in the United States. Moreover, the company provides video lottery central monitoring and control systems and networks primarily to lotteries and gaming regulators. It also offers software, hardware and support to sports betting systems.

The Gaming group provides services and systems to private and public operators in the wide-area gaming industry, including server-based gaming machines and sports betting systems and services. Scientific Games also offers ancillary services to the industry, such as remote management of game content and management information, wagering terminals, central computer systems, data communication and field support services.

Scientific Games faces significant competition in most of its operating markets. The competitors include Pollard Banknote Limited, GTECH, Intralot Technologies, Inspired Gaming Group Limited, International Game Technology, Bally Technologies and Lottomatica to name a few.

Scientific Games Corporation (SGMS): Read the Full Research Report

SCIENTIFIC GAME (SGMS): Free Stock Analysis Report

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