(By Kevin Donovan) You can't beat the house in the long run, but every now and then the cherries line up to deliver a nice return on that odd nickel. Slot machine maker Bally Technologies Inc. (BYI) should keep delivering winning combinations.
Bally reported fiscal fourth-quarter results after the close yesterday, just beating analysts' expectations, but it was the company's upbeat outlook that got the most attention.
The company reported non-GAAP EPS of $0.78 on record revenue of $246 million for the three months ended June 30. Non-GAAP EPS was $2.45 on record revenue of $880 million for the year. Diluted EPS from continuing operations ("Diluted EPS") was $0.61 and $2.28 for F4Q and the year, respectively.
"Our fourth quarter and fiscal 2012 results validate our leadership position in gaming technology innovation," CEO Richard M. Haddrill said in a press release. "This innovation leadership and visibility into further growth opportunities for all of our businesses for fiscal 2013 and beyond is tremendously encouraging."
So encouraging that Bally provided fiscal 2013 guidance of $2.95-3.50 in EPS. Using the midpoint of Bally's fiscal 2013 guidance and Thursday's closing price of $41.99, Bally trades at a forward PE of 13.4. That multiple is in line with that of the S&P 500, but given Bally's growth forecast, we think it deserves a premium.
The stock is up more than 7% today, bringing its year-to-date appreciation into the black. In the past 52 weeks, the stock has traded between $25 and $49
Meanwhile, the $1.8 billion market cap Bally continues to buy back shares. During fiscal 2012 it bought 3.9 million shares for $155 million, including $73 million in the recent quarter. It has purchased another $33 million since the end of the quarter and has about $58 million available under its authorized repurchase plan. The recent period was the 19th consecutive quarter Bally has repurchased shares.
The company said total gaming devices sold was the strongest in 13 quarters. Its installed base of Cash Connection wide-area progressive machines increased by about 500 units in the fourth quarter, including additional installations of "GREASE" and the recently launched "Michael Jackson King of Pop" games. In October, the company said it will unveil new titles at the Global Gaming Expo.
Beyond new machines in traditional venues, Bally has its eye on what could be a big source of growth – online gaming. Bally and competitor International Gaming Technology have received licenses for online gaming from Nevada. This market has potential that we suspect isn't in the price of the stock yet. We think buying at current levels is a good bet with the online prospects thrown in for free.
Las Vegas-based Bally Technologies designs, manufactures, operates, and distributes advanced technology-based gaming devices and systems worldwide, as well as interactive and mobile solutions. Bally's product line includes reel-spinning slot machines, video slot machines, wide-area progressives, and Class II, lottery, and central determination games and platforms. Bally also offers an array of casino management, slot accounting, bonusing, cashless, and table-management solutions.