The first chart details our industry wide projections for slots sales into new casinos and expansions and the year over year change. From the data, it’s pretty difficult to walk away with the conclusion that WMS has a lot of near or intermediate term growth, even if they resume market share gains. The numbers are pulled from our database of every new casino and expansion opening in North America over the next 2 years. The September quarter of 2009 is the only quarter through the end of 2010 where there is a positive delta in domestic slots to new/expanded casinos.
The second chart provides the projected growth by the Street. Currently, the consensus EPS estimates for 2H F2009 and full year F2010 are $0.81 and $1.63, respectively, representing growth of 19% and 14%. Meanwhile, we project total domestic slot unit declines for the industry of 44% and 22%, respectively, over the same period. That’s with a 25% increase in projected replacement demand! As can be seen in the first chart, slot unit sales to new casinos and expansions will be down even more. WMS would need to grow its market share by 10 percentage points to 32% to hit the Street’s domestic unit sales estimate of 19,000 slots in F2010, based on our industry assumptions.
Clearly, there is a big disconnect between the two charts. Market share gains and replacement demand won’t be enough to bridge the gap.