Stock prices for slot machine makers tumble

A lower-than-expected quarterly earnings announcement by WMS Industries sent the stock prices of slot machine companies to declines Tuesday.

WMS, which said Monday its revenues and earnings per share would be far below projections, saw its price on the New York Stock Exchange lose more than 17 percent of its value.

The share prices of WMS' largest competitors also sank on the company's news, although not as steeply.

Last week, Bally Technologies made a similar pre-earnings announcement. The statements from Bally and WMS covered the quarter that ended March 31.

Slot machine makers have been hurt by lack of sales revenues over the past few years as casino companies have reduced spending on new gambling equipment.

Some analysts told investors that the decreasing share prices might be creating stock-buying opportunities.

"While we struggle to identify meaningful value drivers over the near to intermediate term and believe multiple contraction, given diminishing fiscal year 2012 growth and negative investor sentiment towards gaming equipment suppliers is likely, we are confident we would rue throwing in the towel at current levels," Wells Fargo Securities gaming analyst Carlo Santarelli wrote in a research note.

Analysts consider WMS one of the darlings in the gaming equipment sector. The company, which is based in the Chicago suburb of Waukegan, Ill., made a remarkable financial turnaround in the middle of the last decade and is viewed as having taken market share from its closest rivals.

Monday's news that quarterly revenues would be $10 million to $20 million below previous company guidance sent shares of WMS to a 52-week low. The company's shares closed trading at $30.01, down $6.21, or 17.15 percent.

In a statement, WMS said its third-quarter results are "clearly a disappointment and reflect several factors."

Union Gaming Group principal Bill Lerner said WMS had been able to weather the problems other slot machine companies had faced.

"While these dynamics helped for a time, we believe the tough environment, which has been more evident in its competitors' businesses, has finally caught up with WMS," Lerner said.

Other analysts said the negative news about the quarter should not be an indictment of WMS.

Credit Suisse gaming analyst Joel Simkins said WMS is set up to capitalize on improvements in the domestic replacement market and jurisdictional expansion opportunities.

Shares of Reno-based International Game Technology fell 51 cents to $15.38 on the New York Stock Exchange, down 3.21 percent. Bally shares fell 99 cents, or 2.57 percent, to close at $37.58, also on the NYSE.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.