What happened
Shares of gambling industry supplier International Game Technology (IGT 0.39%) fell as much as 16.8% in trading on Tuesday after the company reported fourth-quarter 2021 financial results. Shares finished the day down 13.8%.
So what
Revenue for the quarter was up 19% to $1.05 billion, as the gambling industry overall recovered from the pandemic. The company swung from a loss of $242 million a year ago to a net income of $19 million, or $0.09 per share, but analysts were expecting $0.39 per share in earnings.
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Management also said it's reinstating a dividend of $0.20 per share and buying back $40 million of stock. Free cash flow of $771 million and a debt reduction from $7.3 billion to $5.9 billion to end the year were also positive signs.
Now what
The market's reaction to IGT's results are really about analysts' missing on their estimate of how quickly the bottom line would improve. Coming out of the pandemic, it's going to be difficult to estimate how quickly both revenue and earnings hit a "normal" level, and that's what I think we're seeing today.
Despite the earnings miss, I see a lot of positives in IGT's results. Cash flow is strong, debt is coming down, and clearly there's a lot of growth in the gambling industry today. The market might not like IGT today, but long term, this is a company well positioned to profit from gambling growth around the world.
