IGT: What’s In A Buyback?

Takeaway: IGT is big on buybacks and the trend will likely continue. The company now needs to focus on growing its share price back above $20.

International Game Technology (IGT), one of our heavily-covered gaming names, just completed another round of share buybacks after reporting a mixed third quarter in late July. The company bought back $1 billion of shares and will probably continue to buy back shares going forward. IGT is no stranger to buybacks – it has bought back over 110 million shares in the past 8 years, equating to about 30% of the outstanding shares.

IGT: What’s In A Buyback?  - IGT sharechart

According to Hedgeye Gaming, Leisure and Lodging (GLL) Sector Head Todd Jordan, the buyback “…has been very accretive to EPS but hasn’t done much for the stock.”  The stock is at the low end of its 8 year range and 76% off its high in early 2008.

For IGT’s 2013 fiscal year, we see 25% EPS growth. While on the lower end of expectations, meeting this target would result in significant share appreciation to the delight of investors. Looking at the above chart, you can see that IGT needs to do something to boost the price of its stock in order to get it above $20 a share, a level not seen since 2009.

It’s worth noting that subscribers can get Jordan’s full breakdown of IGT’s earnings, complete with a scorecard and dissection of the company’s future plans to grow revenue.