Gaming supply company Shuffle Master (NASDAQ:SHFL) will report second-quarter 2007 financial results on Wednesday, June 6. Here's what to expect.

What analysts say:

  • Buy, sell, or waffle? A lucky 13 analysts cover the Motley Fool Stock Advisor recommendation, and they seem more upbeat about its prospects than one might expect considering some of its problems of late. Four rate it a buy and seven say hold, but two do say sell.
  • Revenue. There's a 0.4% decline in revenue expected this quarter as sales are forecast to drop to $43.14 million.
  • Earnings. Profits are also expected to drop by 28% as earnings fall to $0.13 per share.

What management says:
Last quarter, Shuffle Master reported that it had "inadvertently" realized certain profits to which it wasn't entitled and had to restate its annual financial report. This also caused the company to delay filing its quarterly report, though both have since been updated. While the first quarter came in at less-than-hoped-for levels, chairman and CEO Mark Yoseloff remained upbeat. "Notwithstanding our short-term issues, our products continue to gain acceptance worldwide and with the proper strategy and execution, our financial results should continue to show steady improvement throughout fiscal 2007 and beyond."

At least one analyst concurred, raising his rating on the company because he noted that industry trends are turning in Shuffle Master's favor -- like leasing equipment for royalty payments rather than buying the stuff -- and its stock price was still low.

What management does:
Integrating its StarGames acquisition has proved more troublesome than anticipated, and with its lower-margin sales, profits have been dwindling. Also taking a vig from Shuffle Master's results has been a general switch away from licensed sales of proprietary games. If the analyst is correct that industry trends are moving this gamer's way, then we can expect to see some improvement ahead.

Margin

01/06

04/06

07/06

10/06

01/07

Gross

72.5%

70.1%

68.6%

65.3%

63.5%

Operating

40.1%

36.5%

33%

28.9%

24.2%

Net

25.2%

7.9%

6.7%

3.1%

(0.1%)
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Although the stock is still off by some 50% from last year's highs, it has recovered some ground lately on the strength of the analyst upgrade. I don't have much confidence yet in Shuffle Master's ability to integrate StarGames while also pushing sales through. Fool gambling analyst Jeff Hwang noted that Shuffle Master was "conspicuously absent" from one of the top trade expos this month. Missing out on opportunities like that to show off your wares does not bode well.

Related Foolishness:

Shuffle Master has earned a two-star rating from Motley Fool CAPS, the new investor-intelligence community. You can add your voice to the stock-rating service by joining today. It's free!

Shuffle Master is a recommendation of Motley Fool Stock Advisor, where after five years it is still beating the house by 37 percentage points. Get in the game with a 30-day free trial subscription.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.