Please ensure Javascript is enabled for purposes of website accessibility

Why Scientific Games Stock Just Popped 21%

By Rich Smith – Nov 8, 2018 at 12:05PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

What's that you say? An IPO is in the works?

What happened

Scientific Games Corporation (LNW 2.10%) -- printer of lottery tickets and seller of electronic gambling machines -- hit the jackpot after reporting third-quarter earnings today. Shares of this gambling facilitator are up 21.4% as of 11:30 a.m. EST despite the company reporting a big GAAP loss -- mostly because its pro forma loss was less than expected.

Scientific Games reported an "adjusted loss" of $0.14 per share for its fiscal third quarter, less than the $0.18 loss that Wall Street had predicted .

Playing cards and poker chips on a table.

Okay, cards on the table: What's the real reason Scientific Games stock is up so much today? Image source: Getty Images.

So what

Calculated according to GAAP accounting standards, of course, the loss was much bigger. As revenues grew 7% year over year to $821 million, Scientific Games took a $338.7 million charge to earnings to account for restructuring costs and a lost court battle in Q3. This charge exacerbated the loss Scientific Games would have otherwise incurred, with the result that "earnings" for the quarter were negative $3.85 per share.

Now what

Still, big as it was, the loss was less than investors had been prepared to see, and that alone probably would have helped to generate a positive reaction in today's trading. Adding to investors' enthusiasm was a comment made in the earnings release, to the effect that "the Company is considering a possible initial public offering of a minority interest in its social gaming business in 2019. ... The Company anticipates that the proceeds from the IPO would primarily be used to repay debt."

This potential for a cash influx that might whittle away at Scientific Games' mammoth $8.9 billion debt load (the company itself has a market cap of only $2.4 billion) gave investors a second reason to cheer this morning -- and, I suspect, is the main reason behind the stock's meteoric rise today.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Light & Wonder, Inc. Stock Quote
Light & Wonder, Inc.
LNW
$48.22 (2.10%) $0.99

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
342%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.