Insights

Why International Game Technology Stock Popped 12.5% on Tuesday

What happened 
Shares of gambling industry supplier International Game Technology (NYSE: IGT) jumped as much as 12.5% in trading on Tuesday after the company reported earnings. Shares closed the day up 10%. 
So what 
Revenue was up 4% in the quarter to $1.05 billion, and operating income fell 3% to $252 million. But the company remained free-cash-flow positive with $115 million in cash generated in the quarter.
Image source: Getty Images.

Net debt also dropped 17% from a year ago to $5.8 billion. The level of debt was always the biggest argument against IGT long term. The company has de-risked the balance sheet and become a better operator in the process. 
Now what 
Net income was down in the quarter, which isn’t a great sign, but management has done a great job of improving the company’s operations, and that seems to be what the market is rewarding. 
Management also announced a $0.20 per-share dividend, which is a positive sign showing that management is expecting free cash flow to continue long term. I don’t think this will be a great growth company given the lack of new casinos being built around the world, but it may be a good cash and dividend stock, which would have been hard to imagine just a few years ago. 
Travis Hoium 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. –

What happened 

Shares of gambling industry supplier International Game Technology (NYSE: IGT) jumped as much as 12.5% in trading on Tuesday after the company reported earnings. Shares closed the day up 10%. 

So what 

Revenue was up 4% in the quarter to $1.05 billion, and operating income fell 3% to $252 million. But the company remained free-cash-flow positive with $115 million in cash generated in the quarter.

Image source: Getty Images.

Net debt also dropped 17% from a year ago to $5.8 billion. The level of debt was always the biggest argument against IGT long term. The company has de-risked the balance sheet and become a better operator in the process. 

Now what 

Net income was down in the quarter, which isn’t a great sign, but management has done a great job of improving the company’s operations, and that seems to be what the market is rewarding. 

Management also announced a $0.20 per-share dividend, which is a positive sign showing that management is expecting free cash flow to continue long term. I don’t think this will be a great growth company given the lack of new casinos being built around the world, but it may be a good cash and dividend stock, which would have been hard to imagine just a few years ago. 

Travis Hoium 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.

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