Susquehanna analyst Joseph Stauff reiterated a positive rating on International Game Technology (NYSE:IGT), raising the price target to $54 from $49.
The company recently released Q2 results, with revenue and operating income margin meeting the high end of the outlook range.
The analyst thinks margin control is notable in Q2 (consolidated EBITDA margins increased +190 bps y/y), with revenue growth now normalizing towards the long-term trend.
The analyst adds that IGT is going into its typically higher FCF-generative part of the calendar (2H) as it weighs various options for potential separation. An announcement for the same is expected in the fall.
A potential separation would largely unlock a higher valuation for its lottery segment in particular. For the lottery, the analyst estimates +2.5% revenue growth.
The analyst adjusted 2023 revenue/EBITDA/FCF projections to $4.25 billion/$1.76 billion/$413 million, respectively, which assumes reported Y/Y growth of +0.6% (or ~7% on a pro forma basis considering the sale of its commercial services business in 3Q22).
For FY24, the analyst projects revenue of $4.4 billion or a +3.6% Y/Y increase. FY24 EBITDA is expected to be $1.9 billion, or 8% growth and a 43.2% margin. The analyst sees an FCF of $924 million in FY24 or a 13.9% FCF yield.
Price Action: IGT shares are trading lower by 2.8% to $32.17 on the last check Wednesday.
