BANGALORE (Reuters) - Slot machine maker Bally Technologies Inc BYI.N cut its full-year profit outlook, partly due to slower-than-expected capital spending by its casino customers, sending its shares down 6 percent.
Separately, the company agreed to sell its Rainbow Casino in Vicksburg, Mississippi, for $80 million in cash to casino operator Isle of Capri Casinos Inc ISLE.O to focus on its core business.
“The (price) they received for it was average. But it will allow the company’s price/earnings ratio to go higher given that Bally is now a pure-play technology company in the gaming space,” Sterne, Agee and Leach analyst David Bain said.
For the fiscal year ending June 30, Bally now expects earnings per share of $2.15 to $2.25, down from its previous outlook of $2.30 to $2.55 per share.
Bain said though the company’s shares will trade lower on the outlook cut, longer term Bally’s prospects were bright.
“Capital spending will continue to be a question. But there are new markets that are opening up that outweigh (these concerns).”
Some U.S. states, facing billion-dollar-plus budget deficits, are looking to gaming to help bridge their budget deficits, which is likely to help slot machine makers such as Bally and its rivals International Game Technology (IGT.N) and WMS Industries (WMS.N).
Analyst Bain maintained his “buy” rating and $54 price target on Bally’s shares.
Bally also said it was working with its bank group to amend its credit agreement and authorized a $150 million share repurchase plan replacing the previous one.
Shares of the company fell to $39.74 in trading after the bell. They closed at $42.33 Monday on the New York Stock Exchange.
Reporting by Mihir Dalal in Bangalore; Editing by Unnikrishnan Nair