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Why Scientific Games' Shares Dropped

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 game maker Scientific Games (Nasdaq: SGMS  ) fell 15% today after reporting earnings.

So what: In the third quarter, revenue rose 2.1% to $227.5 million, but that fell well short of the $233.2 million analysts expected. The company reported a $27.1 million loss but on an adjusted basis loss per share was $0.08. That was far below the $0.07 per share profit analysts expected.  

Now what: Weak sales in China were blamed for the earnings miss as competition enters the market there. Looking at the company's history, we now have four straight quarters of earnings misses and two straight big losses on a GAAP level. I'm staying away from this unprofitable company, because I just don't see a good long-term value proposition going forward.

Interested in more info on Scientific Games? Add it to your watchlist by clicking here.


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