Scientific Games (SGMS) 4 Keys to Earnings, PT Raised to $59 at Jefferies

Jefferies analyst David Katz raised the price target on Scientific Games (NASDAQ: SGMS) to $59.00 (from $55.00) after the company reported 4Q20 results with $762M of revenue and $244M of Adj. EBITDA,
above the Visible Alpha consensus of $704.3M and $239.6M. Gaming segment sales were $286M, handily beating expectations of $226.6M. The analyst noted 4 key takeaways:

1) the company announced a cross-licensing agreement with IGT for cashless gaming IP

2) $150M of cost savings in FY20, of which $50M will be permanent and targeting another $50M in FY21

3) iLottery generated strong growth on a COVID tailwind; PA iLottery saw wagering grow by 39% YoY in 4Q20; Mgt expects at least 10 additional states will authorize iLottery over next few years

4) Paid down $100M of debt in 4Q20 and another $100M in February. Remains committed to deleveraging

The analyst reiterated a Buy rating, stating "Our FY22 estimatesare relatively unchanged at $3.566B for revenue and $1.343B for Adj. EBITDA, vs. $3.522B and $1.353B prior. The near-term catalysts revolve around the potential outcomes from the strategic review, which we believe should be productive, but remain in the context of a positive operating environment for gaming and leisure."

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