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What's in Store for Electronics Arts (EA) in Q3 Earnings?

Electronic Arts Inc. (EA) is set to report third-quarter fiscal 2017 results on Jan 31. In the previous quarter, the company posted a positive earnings surprise of 48.28%. On an average, EA has delivered a positive earnings surprise of 29.89% in the last four quarters.

In the last one year, Electronics Arts has posted a return of 17.07% compared with the Zacks Toys Games Hobbies industry's gain of 18.26%.

Let's see how things are shaping up for this quarter.

Factors at Play

The company will continue to benefit from the growing digital business especially mobile, as well as strength in its portfolio that includes franchises like Star Wars Battlefield, Titanfall and FIFA games. Ongoing Cost optimization initiatives are expected to strengthen its top line.

Moreover, strategic partnerships are likely to push its results for the quarter, especially with the likes of Real Racing 3 with its FIA Formula E Championship. The partnership is also likely to help EA to penetrate further in the Hong Kong market.

For the third quarter, the company expects GAAP revenues of $1.125 billion. The top line will be dampened due to a change in deferred revenues to the tune of $910 million. The company projects GAAP loss per share of 17 cents.

However, the hit driven nature of the video game industry and stiff competition from other game makers such as Activision Blizzard Inc. ATVI and Glu Mobile Inc. GLUU remains major concerns.

Electronic Arts Inc. Price and EPS Surprise

Electronic Arts Inc. Price and EPS Surprise | Electronic Arts Inc. Quote

Earnings Whispers

Our proven model does not conclusively show that Electronic Arts 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 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Electronic Arts has an Earnings ESP of 0.00% as both the Most Accurate and the Zacks Consensus Estimate stand at $2.15. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Electronic Arts currently has a Zacks Rank #3. Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company's ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

A Stock That Warrants a Look

Here is a company that you may want to consider as our model shows that it has the right combination of elements to post an earnings beat in its upcoming release:

Oclaro Inc. OCLR with an Earnings ESP of +10.53% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.

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Oclaro, Inc. (OCLR): Free Stock Analysis Report

Activision Blizzard, Inc (ATVI): Free Stock Analysis Report

Glu Mobile Inc. (GLUU): Free Stock Analysis Report

Electronic Arts Inc. (EA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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