Electronic Arts shares jump on strong 2Q, forecast

Electronic Arts 2Q profit exceeds expectations, raises forecast and shares jump

Associated Press

Shares of Electronic Arts Inc. jumped Wednesday after the video game maker reported a better-than-expected second quarter and raised its full-year earnings forecast.

THE SPARK: The company reported after the market closed Tuesday that it narrowed its loss for the period on cost controls and improved sales of some games. On an adjusted basis, the company earned 33 cents per share, exceeding the 12 cents per share that analysts polled by FactSet had forecast.

Its revenue slipped to $695 million from $711 million. Including revenue from online-enabled games that cannot be accounted for in that measure, its total revenue fell to $1.08 billion from $1.18 billion. Analysts were anticipating revenue of $975.7 million.

Electronic Arts raised its full-year earnings forecast to $1.25 per share from $1.20 and reaffirmed its revenue forecast of $4 billion. Analysts were expecting earnings of $1.23 per share on revenue of $4.04 billion.

THE BIG PICTURE: The company, based Redwood City, Calif., sells video games such as The Sims, Madden NFL and FIFA Soccer.

THE ANALYSIS: Sterne Agee analysts Arvind Bhatia and Brett Strauser reiterated a "Buy" rating on EA's shares. They said the company continues to improve its margins and expects margins could reach 20 percent in the next three years, up from 13.5 percent this year. They also said that the company is well-positioned to benefit from an upcoming release of new game consoles and said that the company's revenue is well-diversified.

SHARE ACTION: Shares jumped $1.94, up 8 percent, to $26.07 by early afternoon amid a broader market dip. Its shares had been climbing the bulk of the year before a slight dip began last month.

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