A lesser-known stock that could pack a strong earnings punch is gaming supply company Shuffle Master (SHFL), which provides various machines for the casino industry. Casinos have been a hot item lately, especially those with a strong presence in Macau, where gaming revenues have jumped. It follows that suppliers to the industry should also do well, particularly those with niche products such as SHFL.
Shuffle Master is scheduled to report Q4 earnings Thursday, Jan. 14. Analysts expect a modest 9 cents per share, a 25% drop from a year ago. More importantly, however, this figure is less than the 10 cents SHFL has earned for each of the past two quarters. It’s clear that expectations for the company are modest at best, which sets it up nicely for an earnings surprise.
I also like SHFL because it’s done very well after recent earnings reports. In fact, the shares have gained an average of 14% in just one day following the past three earnings releases. That’s the kind of move that has options players drooling.
The stock is on a nice run, having gained 25% off a December low. In the process, the shares have taken out most of their daily and weekly moving averages. The next hurdle is the November high near $9.25, and then the September (and 52-week) high just below $10. That leaves plenty of upside room for a post-earnings bounce similar in magnitude to recent quarters.
Sentiment toward SHFL is mixed. Analysts are split, with four “buys” and four “holds.” That leaves ample room for upgrades, which are likely given the strengthening fundamentals.
Option activity is largely bullish, although open interest is on the low side. Overall, the sentiment backdrop is encouraging for a long play.
Shuffle Master is by no means a major name. But the fundamentals are solid and the stock has an impressive post-earnings history. And you can make money off SHFL as easily as an Intel (INTL) or JPMorgan (JPM). With expectations toward SHFL on the muted side, we like it as a bullish play.
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