Why International Game Technology Tanked This Morning

Is this meaningful or just another movement?

Brian D. Pacampara, CFA
Brian D. Pacampara, CFA
Jan 24, 2014 at 12:07PM
Technology and Telecom

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of gaming equipment company International Game Technology (NYSE:IGT) plunged 11% this morning after its quarterly results and outlook disappointed Wall Street.

So what: The stock has slumped over the past six months on signs of slowing growth, and today's Q1 results -- EPS of $0.25 missed Wall Street's estimates by $0.05 on a top-line increase of just 2% -- coupled with downbeat guidance only reinforce that trend. In fact, gross margin fell 200 basis points over the year-ago period to 61%, suggesting that IGT's competitive position is getting more expensive to maintain.

Now what: Management now expects 2014 adjusted EPS to come in at the low end of its guidance range of $1.28 to $1.38. "In our fiscal first quarter we expanded revenue while maintaining strong operating income and cash flows despite market challenges," CEO Patti Hart reassured investors. "We remain confident that our focus on content, distribution and maximizing shareholder value while improving efficiencies will position us for success in fiscal 2014." More important, with the stock now off about 30% from its 52-week highs and trading at a forward P/E of 10, Fools are getting a seemingly attractive price to bet on that bullishness.