Gtech Doubles Second Quarter Earnings, Stock Soars

Gtech Holdings, a lottery operator and one-third owner of Turfway Park, doubled its profits for its fiscal second quarter ending Aug. 24.

The company reported Friday a net income of $38.2 million, or 66 cents a share compared with a year ago when Gtech earned $16.6 million, or 28 cents a share, restated for a 2-for-1 stock split in May.

Revenue did decline 6.6% to $221 million from $236.6 million. Product revenue declined 65% to $9.4 million, when product sales included the one-time sale of terminals and software to a customer in the United Kingdom. Services revenue climbed 0.9% to $211.6 million, driven by several new contracts overseas, including in Jamaica and Taiwan, but the gain was partially offset by the weak Brazilian real.

Cutting costs helped the quarter the most. Costs for the period dropped 22% to $131.1 million. Interest expenses slid 58% to $2.7 million, primarily due to lower debt balances and lower interest rates, which were reduced during the company's debt-restructuring plan in the fiscal fourth quarter.

Despite the decline in revenue, Gtech boosted its earnings forecast for the year, which ends Feb. 22. The company expects service revenue to grow 2-3%, up from 1-2% growth anticipated in June. Earnings for the year have been adjusted upward to $2.10 to $2.20 per share from Juneês projection of $1.70 to $1.80 per share.

Investors seemed to share Gtech's optimism. The company stock opened at $22.50, an 11% jump from Thursdayês closing price of $20.26. The price continued soaring throughout the morning. As of 1 p.m., the stock was trading 20% higher at around $24 on a very heavy volume exceeding 3.2 million shares. Gtech's average daily volume is 714,800 shares.

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