As Macau takes hold of the casino industry, sometimes we forget about how slow the gaming recovery has been in the U.S. Las Vegas is slowly starting to see a turnaround, but regional casino operators are struggling and the weak results are trickling down to gaming suppliers.
Ameristar Casinos (Nasdaq: ASCA ) has seen declining revenue and is forced to share revenue with more competitors, such as Pinnacle Entertainment (NYSE: PNK ) in St. Louis, among other places. Then there's the pitiful condition Atlantic City finds itself in, where even Boyd Gaming's (NYSE: BYD ) Borgata is struggling.
What is the easiest expense to delay if your gaming revenue is down? New slot machines and table games would come to the top of my list.
Indeed, slot machine makers WMS Industries (NYSE: WMS ) and International Game Technology (NYSE: IGT ) reported weaker-than-expected results in their recent earnings reports. IGT is taking the brunt of the pain as WMS takes market share, but both are suffering from the lackluster U.S. gambling market.
The shining jewel may just be a company that Wall Street threw out with the trash a few years ago. When Shuffle Master (Nasdaq: SHFL ) made the transition to a lease-based business model, results suffered and the stock took a nosedive. But financial conditions have slowly improved and after reporting earnings per share of $0.43 in 2010 -- a substantial gain from the year before -- it looks like Shuffle Master made the right moves after all.
As slot makers rely on the whims of struggling casinos to replace machines, it looks like the only gaming equipment supplier worth buying is shuffling cards. Shuffle Master isn't terribly expensive either, with a forward price-to-earnings ratio of 16.6 and a recurring revenue model that will provide consistent results.
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