Take-Two Interactive Software Inc.TTWO is set to report second-quarter fiscal 2016 results on Nov 5. Last quarter, the company delivered a negative earnings surprise of 22.22%. The company delivered positive earnings surprises in three out of the last four quarters, translating to an average positive earnings surprise of 72.30%. Let's see how things are shaping up for this announcement.
Factors to Consider
While, historically, the company has been benefiting from its popular offerings like Grand Theft Auto and Borderlands , the fiscal second quarter is likely to be soft in the absence of any major new release. In fact, for 2015, the company's pipeline consists of only annual updates to its NBA and WWE games, with the sole new offering being XCOM2.
Nonetheless, in August, the company partnered with Lions Gate Entertainment LGF for a movie adaptation of Borderlands . This development might give some boost to the company by opening more growth avenues.
Additionally, it is rumored that the next installment of Grand Theft Auto is due for 2017. Despite a loyal customer base, a 2017 release will be way too slow to capture market share. Further, increasing competition from the likes of Electronic Arts, Activision ATVI and Zynga remains a headwind.
Last quarter, Take-Two delivered weak results, with both the top and the bottom line missing expectations. Furthermore, the company guided cash flow in 2015 to remain flattish.
Our proven model does not conclusively show that Take-Two is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP : Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 3 cents. Hence, the difference is 0.00%.
Zacks Rank : Take-Two's Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
A Stock to Consider
Here is a company, which you may consider, as our model shows that it has the right combination of elements to post an earnings beat this quarter:
Popeyes Louisiana Kitchen, Inc. PLKI , with an Earnings ESP of +2.27% and a Zacks Rank #1 (Strong Buy).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.