Trading Earnings on International Game Technologies

Jul.16.08 | About: International Game (IGT)

International Game Technologies (NYSE:IGT) is set to report earnings before the market opens on Thursday, July 17th. IGT is a global company specializing in the design, manufacture, and marketing of computerized gaming equipment, network systems, licensing and services.

IGT is expected to earn 36 cents per share for its 3rd quarter. We expect IGT to announce earnings that will miss investors’ and analysts’ expectations. Last time out, International Game missed by 35%. We think that it is likely that during the conference call management could lower the company’s profit outlook going forward as most believe Las Vegas is suffering from the economic slowdown.

Analysts’ estimates have been coming down for the quarter, starting at $0.41 and now stand at the 36 cent consensus. Wall Street believes the slot machine maker will see its sales decline 12% for this quarter and anticipates 2% growth next quarter and 30% next year. In light of gas prices, airline surcharges, economic conditions… The Correct Call believes that number is coming down.

IGT has some room to come down as it’s trading at nearly 3 times sales, meaning their market cap (outstanding shares x current market price) is worth $3 for every $1 they do in sales. That’s a little rich for us, even if the company does meet Wall Street’s projections of 30% top line growth next year.

IGT shares have a history of jumping around following their quarterly check-up. Aggressive traders might consider and options straddle here. The August 25 Call options last traded at $1 and the August 25 Put options are only $2.15. If we have made The Correct Call and IGT falls by more than $1 following its 3rd quarter report, investors make a profit. If we are wrong and it manages to gain more than a buck and a quarter, losses should be minimal.

Suggested Stop: $29.05

Disclosure: None