Electronic Arts Inc. Earnings Cheat Sheet: Reversing to a Loss Following Two Consecutive Quarters of Profit

S&P 500 component Electronic Arts Inc.’s loss widened in the second quarter, as the company’s results were dragged down by higher costs. Electronic Arts develops and distributes video game software and content across a variety of platforms.

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Electronic Arts Earnings Cheat Sheet for the Second Quarter

Results: Loss widened to $340 million ($1.03 per diluted share) from $201 million (loss of 61 cents per share) in the same quarter a year earlier.

Revenue: Rose 13.3% to $715 million from the year earlier quarter.

Actual vs. Wall St. Expectations: ERTS reported adjusted net income of 5 cents per share. By that measure, the company beat the mean analyst estimate of a loss of 15 cents per share. It fell short of the average revenue estimate of $964.8 million.

Quoting Management: “EA had a strong quarter on the strength of FIFA 12, Madden NFL 12, and The Sims Social,” said John Riccitiello, Chief Executive Officer. “Battlefield three is off to a fantastic start on sales and quality, and we are preparing to launch two more blockbusters: Need for Speed The Run, and Star Wars: The Old Republic.” “We are pleased with our results with digital growing at 30% year-over-year,” said Eric Brown, Chief Financial Officer. “We are raising our fiscal 2012 non-GAAP revenue guidance, our digital revenue guidance, and the midpoint of our EPS guidance.”

Key Stats:

Gross margin shrank 2.9 percentage points to 39.6%. The contraction appeared to be driven by increased costs, which rose 19% from the year earlier quarter while revenue rose 13.3%.

Revenue has now gone up for three straight quarters. In the first quarter, revenue rose 22.6% to $999 million while the figure rose 11.3% in the fourth quarter of the last fiscal year from the year earlier.

The company topped expectations last quarter after falling short of forecasts in the first quarter with a loss of 48 cents versus a mean estimate of a loss of 45 cents per share.

The company’s loss in the latest quarter follows profits in the previous two quarters. The company reported a profit of $221 million in the first quarter and a profit of $151 million in the fourth quarter of the last fiscal year.

Looking Forward: The outlook for the company’s results in the upcoming quarter is unfavorable. The average estimate for the third quarter is 78 cents per share, down from 79 cents ninety days ago. For the fiscal year, the average estimate has moved up from 52 cents a share to 56 cents over the last ninety days.

Competitors to Watch: Activision Blizzard, Inc. , THQ Inc. , Take-Two Interactive Software, Inc. , Microsoft Corporation , KONAMI CORPORATION , Majesco Entertainment Co. , Sony Corporation , Nintendo Co., Ltd (NTDOY), The Walt Disney Company , and Glu Mobile Inc. .

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(Source: Xignite Financials)