), the video game and entertainment software retailer, recently
posted third quarter 2011 results.
Street analysts had more than a week to ponder the news. In the
subsequent paragraphs, we cover the recent earnings announcement,
analysts' estimate revisions as well as the Zacks Rank and
long-term recommendation on the stock.
Earnings Report Review
Strong digital sales helped GameStop post quarterly earnings of
39 cents per share, up 2.6% year over year from 38 cents a
share. However, reported earnings were in line with the
Zacks Consensus Estimate.
GameStop, which faces stiff competition from
), reported total revenue of $1,946.8 million, up 2.5% from
$1,899.2 in the year-ago quarter. However, total revenue remained
below the Zacks Consensus Revenue Estimate of $1,963 million.
For the fourth quarter of 2011, GameStop anticipates comparable
store sales in the range of flat to up 2%. GameStop expects
earnings in the range of $1.66 to $1.76 per share.
For fiscal year 2011, the company reiterated its previously
announced earnings guidance range of $2.82 to $2.92 per share,
reflecting an increase of 6.4% to 10.2% over the last fiscal
GameStop expects comparable store sales in the range of -1% to
flat, reflecting revenue growth of 2% to 3% for fiscal 2011.
(Read our full coverage on this earnings report:
GameStop Reports In Line
Agreement of Estimate Revisions
A mixed sentiment is evident among analysts following the
earnings release. Over the last 30 days, 5 out of the 16 analysts
covering the stock increased their estimates while 7 analysts
lowered the same for fourth quarter 2011. For first quarter 2012, 4
analysts revised their estimates in the upward direction, while an
equal number of analysts reduced the estimates.
For fiscal 2011, 2 analysts increased their estimates while 10
analysts moved in the opposite direction. For 2012, 5 analysts
increased their estimates, while 7 analysts lowered their
Magnitude of Estimate Revisions
In the last 30 days, the Zacks Consensus Estimate for fiscal
2011 came down by 3 cents to $2.87, while for fiscal 2012, the
Estimate inched down a penny to $3.13.
For both the fourth quarter of 2011 and first quarter of 2012,
the Zacks Consensus Estimates inched down a penny to $1.72 and 60
cents, respectively, in the last 30 days.
The current Zacks Consensus for fourth quarter 2011 is pegged
from a low of $1.67 to a high of $1.86. For fiscal 2011, the
estimates range from $2.83 to $2.93.
Factors Driving Estimates
GameStop continued to expand and emerged as a mixed retailer of
physical and digital gaming and electronics products. The company's
foray into digital, iDevice and gaming tablet businesses would be
accretive to its results. The company's buy-sell-trade model of
selling new games and buying back used games and PowerUp Rewards
program makes it a preferred destination for shopping.
Moreover, GameStop is well positioned to take advantage of a
growing market for video game products and PC entertainment
software. The company's strategy is to grow through store
expansions in favorable localities, by providing the largest title
collection of video games, and by leveraging its first-to-market
distribution network to offer the latest hardware and software
However, the video game industry is highly competitive, and
video game shoppers now have a host of alternatives to buy
software, hardware, and game accessories for video game systems and
personal computers. Retail heavyweights have also entered the video
game market. These larger retailers could dent GameStop's sales and
Currently, consumers can only download a limited number of PC
entertainment software and older generation video games from the
Internet. However, with the advancement of technology, if the
consumer's accessibility increases, they may no longer prefer to
buy PC entertainment software and video games through the company's
We have a long-term 'Neutral' recommendation on GameStop.
Moreover, GameStop has a Zacks #3 Rank, which translates into a
short-term 'Hold' rating.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago
that earnings estimate revisions are the most powerful force
impacting stock prices. He turned this ground breaking discovery
into two of the most celebrating stock rating systems in use today.
The Zacks Rank for stock trading in a 1 to 3 month time horizon and
the Zacks Recommendation for long-term investing (6+ months). These
"Earnings Estimate Scorecard" articles help analyze the important
aspects of estimate revisions for each stock after their quarterly
earnings announcements. Learn more about earnings estimates and our
proven stock ratings at:
AMAZON.COM INC (
): Free Stock Analysis Report
GAMESTOP CORP (
): Free Stock Analysis Report