Electronic Arts (EA) to Report Q4 Earnings: What to Expect?

Electronic Arts Inc. (EAFree Report)  is set to report fourth-quarter fiscal 2017 results on May 9. In the previous quarter, the company posted a positive earnings surprise of 13.95%. On an average, EA has delivered a positive earnings surprise of 32.94% in the last four quarters.

In the last one year, Electronics Arts has posted a return of 48.2% compared with the Zacks Toys Games Hobbies industry’s gain of 29.4%.

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

Factors at Play

We believe that EA’s popular franchises and strength in digital business, especially mobile, are key growth catalysts. Moreover, ongoing cost-optimization initiatives are expected to strengthen the company’s top-line performance in the to-be-reported quarter.

Last quarter, consistent increases in digital revenues and strength in EA Sports titles like Battlefield 1 and FIFA 17 were the driving factors.

Further, strategic partnerships are likely to push the company’s 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 to-be-reported quarter, the company expects GAAP revenues of $ 1.482 billion. The top line will be dampened due to a change in deferred revenues to the tune of $ 407 million. The company projects GAAP earnings per share of $ 1.64.

However, the hit driven nature of the video game industry and stiff competition from other game makers such as Activision Blizzard Inc. (ATVIFree Report) and Glu Mobile Inc. (GLUUFree Report) remain major concerns.

Earnings Whispers

Our proven model does not conclusively show that Electronic Arts will beat on 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 estimate and the Zacks Consensus Estimate are pegged at 61 cents. 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 a 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:

EGain Corp. (EGANFree Report) with an Earnings ESP of +50.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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