August 7, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of lottery solution provider Scientific Games (Nasdaq: SGMS ) fell as much as 34% after the open today after the company announced terrible earnings numbers.
So what: During the second quarter, revenue rose 4% to $229.3 million but the company swung to a loss of $12.6 million, or $0.14 per share. Analysts had expected revenue of $245 million and earnings per share of $0.12.
To make matters even worse, management purchased 1.34 million shares of Scientific Games' common stock for an average price of $8.34 in the quarter, a huge waste of money considering the company's current stock price.
Now what: The U.S. and U.K. markets appear to be driving sales, with Italy and China accounting for the disappointing numbers. I'm concerned about the company's earnings miss and the loss of cash in the repurchase program, which could have been used to pay down the company's $1.55 billion debt load.
I simply see no reason to be buying shares today and wouldn't touch the stock until the debt load is dramatically reduced.
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