Shuffle Master shares surge on 2Q earnings beat

Shares of Shuffle Master Inc. surged Wednesday after the casino equipment maker reported stronger-than-expected quarterly results.

Shuffle Master said Tuesday its fiscal second-quarter rose 50 percent. Strong sales of its card shuffler units and healthy lease revenue, as well as effective cost controls, helped boost its revenue, Todd Eilers of Roth Capital Partners LLC wrote in a client note.

"Overall, Shuffle posted a strong quarter in a tough macro environment," Eilers said.

Shuffle Master said profit for the quarter ended April 30 rose to $4.6 million, or 9 cents per share, beating the average estimate of 4 cents per share, expected by analysts polled by Thomson Reuters.

Eilers raised his 2009 and 2010 profit estimates by 6 cents each to 26 cents and 34 cents, respectively. He also lifted his 12-month price target to $5 from $2.25, but maintained a "Hold" rating.

Meanwhile, Stifel Nicolaus & Co. analyst Steven Wieczynski said in a note to investors that Shuffle Master's balance sheet continues to strengthen as the company makes a transition back to a lease model and states with budgetary issues, like New York and Delaware, take a closer look at the company's products as a way to expand casino and tax revenue.

Wieczynski lifted his 2009 profit estimate to 27 cents from 20 cents, but lowered his 2010 estimate to 28 cents from 33 cents to account for lower average sales prices. He maintained a "Buy" rating and $7 price target.

Shares of Shuffle Master rose $1, or 22 percent, to $5.61 in morning trading.