The Zacks Analyst Blog Highlights: PartnerRe, Electronic Arts, Activision, Microsoft and Sony

Zacks

For Immediate Release
 
Chicago, IL – November 26, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the PartnerRe Ltd. (PRE-Free Report), Electronic Arts (EA-Free Report), Activision (ATVI-Free Report), Microsoft (MSFT-Free Report) and Sony (SNE-Free Report).
 
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Monday’s Analyst Blog:

PartnerRe Upped to Outperform

On Nov 22, we upgraded our recommendation on PartnerRe Ltd. (PRE-Free Report) to Outperform based on its improved risk profile, underwriting capabilities and the latest acquisition of Presidio Reinsurance, all of which are showing positive results.

Why the Upgrade?

Estimates for this global life and property-casualty insurer and reinsurer witnessed significant corrections after the company reported its third-quarter 2013 results on Oct 28. Both operating earnings of $5.70 per share and total revenue of $1.56 billion topped the Zacks Consensus Estimate of $2.32 a share and $1.43 billion, respectively, during the third quarter.

Earnings also remarkably exceeded the year-ago quarter number of $3.90 a share by 46.2%, although total revenue dipped 4.1% from the prior-year quarter.

Higher premiums and lower catastrophe losses boosted underwriting and technical results, while also improving the combined ratio, ROE and book value per share. Overall, PartnerRe delivered positive earnings surprises in all the last 4 quarters with an average beat of 163.6%.

Following the release of the third-quarter results, the Zacks Consensus Estimate for 2013 surged 35.5% to $12.22 per share in the last 30 days. Moreover, the Most Accurate Estimate for PartnerRe’s 2013 earnings stands at $12.56 a share, resulting in a positive Earnings ESP of 2.8%.

Further, the Zacks Consensus Estimate for 2014 edged up 2 cents per share to $9.44 in the last 30 days. Meanwhile, no downward revision in estimates was witnessed for both the years. With the Zacks Consensus Estimate on both fronts exhibiting strong upward pressure in the near term, PartnerRe now has a Zacks Rank #1 (Strong Buy).

NCAA Files Lawsuit vs. EA

Electronic Arts (EA-Free Report) is facing a fresh lawsuit from National Collegiate Athletic Association (:NCAA). NCAA has sued the video game maker, stating that EA did not agree to compensate NCAA, although it agreed to compensate the college athletes for the legal claims made by them.

Electronic Arts previously cited uncertainty about the future of the franchise due to the ongoing legal dispute between the NCAA and student players. Although Electronic Arts agreed to settle the claims of student players in Sep 2013 worth$40.0 million, NCAA was never a part of it.

Per the complaint filed on Nov. 4 in Fulton County, the settlement fees paid by Electronic Arts would have relieved the company from the contractual duty to indemnify NCAA for any liability, which includes attorney fees, arising from the NCAA-themed football and basketball video games.

The dispute between NCAA and students started when the latter asked for a share of NCAA revenues for the use of their images and likenesses. Student athletes also sued NCAA’s business partner EA for illegally using their likenesses in its popular NCAA Football video game.

Electronic Arts developed a NCAA-branded game each year and recently released NCAA Football 14 in Jul 2013. The practice is more or less similar to the games made under other popular banners such as the National Football League (:NFL) and FIFA.

Electronic Arts made it obvious that there is growing risk faced by game developers in trying to profit from the likeness of the student athletes with that of video game characters. We believe that the cancellation of NCAA Football 2015 will have a significant effect on EA’s top-line over the long term.

Nevertheless, we believe that EA has a strong product portfolio that includes popular games such as Madden NFL and FIFA 14. We believe that the strong revenue contribution from these games will offset the loss of NCAA and the monetary compensation to be paid (if any) in the near term.

We believe that traditional gaming companies, such as EA and Activision (ATVI-Free Report) have substantial growth opportunities due to the launch of new consoles by Microsoft (MSFT-Free Report) and Sony (SNE-Free Report) and strong spending expected in the holiday season.

We also believe that Electronic Arts continues to hold a competitive edge due to strong digital distribution and leadership position in the free-to-play games category.

However, a fragmented video gaming market and stiff competition are the major concerns.
Currently, EA has a Zacks Rank #3 (Hold).

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