Jefferies Bullish On WMS Industries After Earnings

WMS Industries

reported 1QFY11 adjusted EPS of $0.37, excluding a $0.04 charge related to the closure of the Netherlands facility, and adjusted EBITDA of $59.3M. On 11/1, after the close, WMS reported 1QFY11 adjusted EPS of $0.37 vs. consensus of $0.36 and Jefferies estimate of $0.39. Revenue of $187.5M was above an estimate of $170.3M. Adjusted EBITDA of $59.3M excluded stock-based comp expense of $5.1 million, a $5.3 million charge due to amortization of intangible and other assets, and a $3.8 million charge for the closure of its Netherlands facility, and was slightly below Jefferies estimate of $60.3M. Machine sales revenue of $111.2M was ahead of Jefferies estimated $92.3M on gross margin of 48.7% vs. 53.7%. Units of 5,338 compared with its 4,833 estimate, while ASP was $990 higher than its estimate. Gaming operations revenue and gross margin were consistent with expectations at $76.3M and 81.0% vs. forecasts of $78.1M and 81.0%. Jefferies price target depends on the fundamental strength of the company's primary customers, casino operators. These casino operators are somewhat dependent on the strength of the economy and consumers' discretionary income. Jefferies has a Buy rating with a $51 PT on WMS WMS closed Monday at $41.50