Sector Snap: Analyst keeps Bally Tech as top pick

NEW YORK - An analyst kept slot-machine maker Bally Technologies Inc. as his top pick Wednesday, saying the company continues to find ways to expand margins and cut costs.

Justin Sebastiano of Morgan Joseph & Co. said in a client note that Las Vegas-based Bally is looking to reduce costs by streamlining manufacturing and lowering its interest expense. Accounting, professional and legal fees are also expected to drop.

Sebastiano increased Bally's price target to $42 from $34 based on 2010 estimates and raised his 2010 earnings forecast to $2.30 per share from $2.18 per share.

Analysts surveyed by Thomson Reuters, whose estimates normally exclude one-time items, predict 2010 profit of $2.36 per share.

Shares of Bally Technologies added 72 cents, or 2.1 percent, to $35.31 in morning trading.

Sebastiano also lifted the price target of fellow slot machine maker WMS Industries Inc. to $39 from $33, again looking at 2010 estimates rather than 2009 estimates to value the stock. He boosted the Waukegan, Ill.-based company's 2010 profit forecast to $1.79 per share from $1.66 per share, saying he anticipates more revenue from participation games.

Analysts expect 2010 net income of $1.75 per share.

"Additionally, we predict slightly wider margins on machine sales and expect to see further reductions to the selling, general and administrative line through a continued focus on productivity and cost containment," Sebastiano wrote, adding that the company has the strongest balance sheet in the group.

WMS's stock rose 46 cents to $34.88.

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