Why SHFL Earnings Might Still Matter

SHFL Entertainment (SHFL.DL) will release its quarterly report on Friday, and the company has had an exciting quarter after having gotten a takeover bid. With a bid from Bally Technologies (NYSE: BYI) outstanding, SHFL earnings might not seem to matter. But until the deal closes, it's still important for the company to keep executing on its business plan.

SHFL Entertainment is the company behind the Shuffle Master card-shuffling machine, but the business goes well beyond its namesake product. SHFL also makes tracking devices to detect cheating and provide analysis of table-game play, along with electronic gaming tables and similar devices. Let's take an early look at what's been happening with SHFL Entertainment over the past quarter and what we're likely to see in its report.

Stats on SHFL Entertainment

Source: Yahoo! Finance.

Is the merger good news for SHFL investors?
Analysts haven't budged on their views of SHFL's earnings in recent months, keeping both current-quarter and current- and next-year's earnings estimates unchanged. But in light of the Bally offer, the stock has soared, climbing 32% since late May.

SHFL investors got the good news about the Bally deal in mid-July, when Bally announced its $1.3 billion bid for the company. In the deal, SHFL shareholders will get $23.25 in cash per share, and the acquisition should help Bally build a full-service casino supply company that gaming giants will be able to rely on for many aspects of casino operations.

The SHFL/Bally combination is also well suited to handle the online-gaming trend. Along with International Game Technology (IGT 0.39%), Bally was one of the first companies to get a license for online gaming within Nevada, and even though the license is limited to that state, the company is well-positioned to handle further expansion if nationwide online gambling gets legalized. With Bally having offered its online games via platform-partners and having joined with a payment processing company to allow customers to use gaming-payment services to fund their accounts, SHFL and Bally should have a competitive edge over slower-moving companies in the rapidly evolving space.

Arguably, SHFL needed to make a move in order to compete. With rivals Scientific Games (LNW 4.09%) and WMS Industries (NYSE: WMS) having decided to merge earlier this year, their combination brings government-sponsored lotteries and gaming-device expertise together in a single company. Even though WMS just reported much lower net income compared to year-ago levels, the post-merger Scientific Games should be able to reap advantages from their combination.

In the SHFL earnings report, watch for comments on next steps following the company's having reached the end of the Hart-Scott-Rodino waiting period without action from the FTC or the Department of Justice. Without such comments, SHFL shareholder approval is one of the last steps needed to finish the deal and pay off investors once and for all.

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