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Electronic Arts (EA) to Report Q2 Earnings: What's in Store?

Zacks Equity Research

Electronic Arts EA is set to report second-quarter fiscal 2020 results on Oct 29.

For the second quarter of fiscal 2020, EA expects GAAP revenues of $1.315 billion. The Zacks Consensus Estimate for second-quarter 2020 revenues is pegged at $1.24 billion, which indicates growth of 1.52% from the year-ago quarter’s reported figure.

The company expects GAAP earnings to be $2.60 per share, including roughly $2.08 related to income tax benefits for the to-be reported quarter.

The Zacks Consensus Estimate for earnings has remained unchanged at 85 cents over the past 30 days. Notably, the company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average negative surprise being 44.48%.

EA reported adjusted loss of 2 cents per share in the last reported quarter. The Zacks Consensus Estimate for earnings was pegged at 1 cent.

However, GAAP revenues increased 6.3% year over year to $1.21 billion in first-quarter fiscal 2020.

Let’s see how things have shaped up for the upcoming announcement.

Electronic Arts Inc. Price and EPS Surprise

Electronic Arts Inc. Price and EPS Surprise

Electronic Arts Inc. price-eps-surprise | Electronic Arts Inc. Quote

Factors to Consider

EA’s focus on adding updates to its games that feature exciting content and new technology makes the platform attractive to users.

Strong popularity of two well-recognized EA Sports franchises, FIFA and Madden NFL, is expected to have contributed to top-line growth in the soon-to-be-reported quarter.

Notably, the FIFA eWorld Cup finals in August, engaged 17 official lead partners, players from 20 different nations, more than 30 live events and with more than 60 million total views till Jul 30.

Additionally, the successful rollout of EA Sports content such as Madden NFL 20 Championship Series, which received tremendous initial response, and NHL 20 is likely to have increased viewership and drawn more users to the platform globally in the second quarter.

Moreover, portfolio strength in popular gaming franchises like The Sims 4 and Apex Legends is expected to have benefited EA’s net bookings in the to-be reported quarter. Notably, net bookings are expected to be $1.230 billion for the second quarter as guided by the company.

New game releases such as Sea of Solitude and Plants vs. Zombies: Battle for Neighborville from popular franchises are expected to have driven user engagement levels and growth in active player accounts for the to-be reported quarter.

Further, EA's strength in Live Services from mobile games such as Madden Mobile, FIFA Mobile and Star Wars: Galaxy of Heroes is expected to have positively impacted the top line.

The company also introduced various in-game passes, challenges and events for users to subscribe during the quarter, which is likely to have aided growth in subscription revenues from live services on mobile, PC and console.

Notably, launch of EA Access on Playstation 4 is expected to have contributed to the company’s subscription revenues in the to-be reported quarter.

However, intensifying competition in the video game space from the likes of Activision, Take-Two Interactive and Zynga is likely to have hurt the company’s top line in the second-quarter.

What Our Model Says

According to the Zacks model, a company needs the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of a positive earnings surprise.

EA has an Earnings ESP of 0.00% and a Zacks Rank #3, which makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a couple of stocks you may want to consider, as our model shows that these have the right combination of elements to deliver an earnings beat.

Weight Watchers International WW has an Earnings ESP of +0.64% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Columbia Sportswear Company COLM has an Earnings ESP of +0.74% and a Zacks Rank #1.

Cable One Inc. CABO has an Earnings ESP of +4.1% and a Zacks Rank #2.

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