Gaming equipment supplier IGT’s top priorities for effective capital allocation are deleveraging and paying a steady dividend, Wells Fargo said.
Analyst Cameron McKnight said after meetings with IGT “we…came away incrementally more positive on management and the company’s leadership.”
McKnight cited the company’s Italian Lotto contract renewal as a main focus for investors, and IGT’s management seems confident in its ability to retain this business.
However “in terms of capital allocation, we believe deleveraging and paying a steady dividend are IGT’s top priorities.”
McKnight added that while it is unlikely that IGT would buy back stock in the very near-term given recurring capital requirements and a focus on deleveraging, “we’re incrementally more confident that IGT remains committed to a steady dividend.”
WF maintains a Market Perform rating on IGT and a $19 to $23 valuation range, reflecting an 11 to 13 percent yield on estimated normalized equity free cash flow of approximately $2.50 per share in 2017.