Electronic Arts Inc. (
is set to report fourth-quarter 2014 results on May 6. Last
quarter, EA posted a 0.9% positive surprise. The company has
posted an average positive earnings surprise of 290.7% over the
past four quarters. Year-to-date, EA's share price has increased
24.8% compared with 2.7% in the S&P 500.
Let's see how things are shaping up for the first quarter:
Growth Factors this Past Quarter
We believe that EA's strong digital portfolio and continuing
growth in the tablet and smartphone market are the key growth
catalysts. The wide array of titles and massive fan following
will better equip EA to gain traction in the digital gaming
segment than most of its peers.
For the fourth quarter of fiscal 2014, EA expects to generate
non-GAAP revenues of approximately $800.0 million, lower than the
Zacks Consensus Estimate of $810.0 million.
Non-GAAP gross margin is expected to be 71.0% down from 74.0%
reported in the year-ago quarter. Non-GAAP operating expense is
expected to be $525.0 million. The company expects non-GAAP
earnings to be 9 cents per share, much higher than the Zacks
Consensus Estimate of 3 cents.
However, intensifying competition from
Activision Blizzard (
Take-Two Interactive (
remains a concern. Additionally, higher consumer spending on new
and Sony may cannibalize software sales in the near term. The
delay in the launch of
for Xbox 360 will hurt results. We, therefore, remain cautious on
EA's fourth-quarter guidance.
Our proven model does not conclusively show that EA is likely to
beat earnings this quarter. That is because a stock needs to have
both a positive
and a Zacks Rank of #1, 2 or 3 for this to happen. That is not
the case here as you will see below.
: Earnings ESP for EA stands at 0.00%. This is because both the
Most Accurate estimate and the Zacks Consensus Estimate are
pegged at 3 cents.
: EA's Zacks Rank #3 (Hold) when combined with 0.00% ESP makes
surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated
stocks) going into the earnings announcement, especially when the
company is seeing negative estimate revisions.
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