Electronic Arts Inc.
) is scheduled to release its fiscal first quarter 2013 results
after market closes today. In the run up to the earnings release we
do not notice any estimates revision by the analysts covering the
EA has outperformed the Zacks Consensus Estimate in the
preceding four quarters by 6.74%. We expect this trend to continue
in the current quarter.
Previous Quarter Highlights
EA's bottom line of 11 cents in the fourth quarter (including
stock based compensation but excluding other one time items) beat
the Zacks Consensus Estimate of 6 cents. However, it slumped 45.0%
from the previous-year quarter due to margin contractions.
Revenues, including deferred revenue of ($391 million), moved
down 1.8% from the previous-year quarter to $977 million and missed
the Zacks Consensus Estimate of $1.24 billion. The digital revenue
segment's jump failed to offset the decline in Publishing Packaged
Goods and Other Revenue and Distribution Packaged Goods
For further details please read:
EA's Outlook Disappoints
Estimate Revision Trend
In the last 30 days, none of the four analysts covering the
stock revised their estimates. Thus, the Zacks Consensus Estimate
for first quarter 2013 is pinned at a loss of 51 cents per share,
which is wider than management's guidance range of a non-GAAP loss
per share of 45 cents to 40 cents.
Analysts remain cautious on the stock due to sluggish revenue
from packaged goods segment coupled with lower subscription
additions in the
Star Wars: The Old Republic.
Analysts expect social gaming segment to be a drag during the
quarter. However, analysts continue to expects strong digital
revenue growth in the quarter.
We expect EA to report a decent quarter, aided by the release of
high-quality titles and downloadable content along with increasing
online exposure. EA's shift of focus to the digital format and its
diversified portfolio, coupled with a strong product pipeline are
expected to drive the top-line going forward.
However, the gloomy macro-economic environment, increasing
competition and weak video game sales results over the last 12
months, compel us to remain cautious in the near term. Competition
Activision Blizzard Inc.
Take-Two Interactive Software Inc.
) may act as the other headwinds going forward. In addition, the
company's tepid guidance for the quarter has also acted as the
detrimental factor. Moreover, year to date, EA's shares are down
47.3% compared to a 8.5% rise in the S&P 500 which narrates the
company's dismal performance.
We have a Neutral recommendation on Electronic Arts over the
long term (for the next 6 to 12 months). Currently, Electronic Arts
has a Zacks #4 Rank, which implies a Sell rating in the short
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