U.S. markets close in 3 hours 9 minutes

Take Two (TTWO) to Report Q3 Earnings: What's in the Cards?

Zacks Equity Research

Take Two Interactive TTWO is set to report third-quarter fiscal 2020 results on Feb 6.

For the quarter, the company expects net revenues between $915 million and $965 million, and GAAP earnings of $1.39-$1.49 per share.

The Zacks Consensus Estimate for the fiscal third-quarter earnings remained unrevised at $1.73 per over the past 30 days.

Notably, the company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 193%.

Let’s see how things have shaped up prior to this announcement.

Take-Two Interactive Software, Inc. Price and EPS Surprise

Take-Two Interactive Software, Inc. Price and EPS Surprise

Take-Two Interactive Software, Inc. price-eps-surprise | Take-Two Interactive Software, Inc. Quote

Will Portfolio Strength Aid Top Line ?

Take Two is expected to have benefited from popularity of its franchises — Borderlands, Grand Theft Auto (GTA), Red Dead Redemption and NBA.

Additionally, the company’s expanded portfolio with multiple game launches during the to-be-reported quarter is expected to have aided the top line.

Notably, worldwide release of games in the fiscal third quarter, including Sid Meier’s Civilization VI for the Xbox One family of devices and PS4, Red Dead Redemption 2 for the PC, The Outer Worlds and WWE2K20 for Xbox One family of devices, PS4, PS4 Pro, and Windows PC, is also expected to have boosted active user growth.

Moreover, NBA 2K20, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, The Outer Worlds, Borderlands 3, and the WWE 2K-series are expected to have been the largest contributors to net bookings in the to-be-reported quarter.

The company expects net bookings to between $860 million and $910 million in the fiscal third quarter. In the year-ago quarter, bookings totaled $1.474 billion.

Notably, the Zacks Consensus Estimate for net bookings is currently pegged at $917 million.

Notably, Borderlands 3, launched in the fiscal second quarter, sold more than 5 million units in the first five days of launch, making it the fastest-selling title in 2K history and the highest-selling title for the label on PC. This is expected to have fueled user growth and engagement levels in the quarter in discussion.

Take Two’s continued support for both Red Dead Online and Grand Theft Auto Online with new features and updates are expected to have enhanced user engagement and player growth.

The company expects digitally-delivered net bookings to be up 5% from the year-ago quarter, assuming that 50% of current generation console games are delivered digitally, up from the prior year’s 31%.

Take Two’s Private division released Ancestors: The Humankind Odyssey for digital download on PS4, PS4 Pro, and across the Xbox One family of devices, including Xbox One X in the fiscal third quarter, which is likely to have contributed to digitally-delivered net bookings.

Other Factors at Play

Moreover, the company is expected to have benefited from growth in recurrent consumer spending (virtual currency, add-on content and in-game purchases, including the allocated value of virtual currency and add-on content incorporated in special editions of certain games). Notably, Take Two expects recurrent consumer spending to be up more than 5% year over year in the fiscal third quarter.

This growth is expected to have been driven by Grand Theft Auto Online, Red Dead Online, excluding last year's allocation.

Additionally, the release of Civilization VI Expansion Bundle, WWE SuperCard limited edition cards and Kerbal Space Program Enhanced Edition: Breaking Ground expansion pack is anticipated to have attracted players, driving consumer spending for the to-be-reported quarter.

Moreover, 2K Visual Concepts’ NBA 2K20 launched in the fiscal second quarter, is likely to have propelled user growth and recurrent consumer spending in the third quarter.

However, higher operating expenses, particularly research & development, and personnel costs are likely to have depressed margins. The company continues to face stiff competition in the video game market from the likes of EA, Activision Blizzard, Gluu Mobile and Zynga.

What Our Model Says

According to the Zacks model, the combination of two key ingredients — a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — increases the odds of an earnings beat. But that’s not the case here.

Take Two has an Earnings ESP of +3.41% and a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat in their upcoming release.

Perion Network Ltd. PERI has an Earnings ESP of +22.58% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

CEVA Inc. CEVA has an Earnings ESP of +27.06% and a Zacks Rank of 1.

Bruker Corporation BRKR has an Earnings ESP of +0.86% and a Zacks Rank #2.

7 Best Stocks for the Next 30 Days

Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers “Most Likely for Early Price Pops.”

Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.7% per year. So be sure to give these hand-picked 7 your immediate attention.

See 7 handpicked stocks now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Perion Network Ltd (PERI) : Free Stock Analysis Report
CEVA, Inc. (CEVA) : Free Stock Analysis Report
Bruker Corporation (BRKR) : Free Stock Analysis Report
Take-Two Interactive Software, Inc. (TTWO) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research