Activision (ATVI) to Report Q3 Earnings: What's in Store?

Activision Blizzard ATVI is set to report third-quarter 2019 results on Nov 7.

For the quarter, the company expects non-GAAP revenues of $1.11 billion and earnings of 20 cents per share.

The Zacks Consensus Estimate for third-quarter earnings has remained steady at 25 cents per share over the past seven days.

Notably, the consensus mark for revenues is pegged at $1.17 billion, indicating a decline of 29.2% from the year-ago quarter’s reported figure.

In the second quarter, Activision reported non-GAAP earnings of 53 cents per share that declined 59.5% year over year. The figure was better than the company’s guidance of 35 cents for the quarter.

Consolidated revenues declined 14.9% year over year to $1.40 billion, which was better than the company’s guidance of $1.32 billion.

Notably, the company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average positive surprise being 18.03%.

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

Activision Blizzard, Inc Price and EPS Surprise

Activision Blizzard, Inc Price and EPS Surprise

Activision Blizzard, Inc price-eps-surprise | Activision Blizzard, Inc Quote

Factors to Consider

Activision’s popular franchises, exciting content and new releases make the platform attractive to users.

Strong popularity of Activision’s franchises like Call of Duty, Overwatch and Hearthstone is expected to have boosted in-games spending and driven net bookings and top-line growth in the third quarter.  

The company expects net bookings of $1.10 billion in third-quarter 2019.

Notably, Blizzard division released its latest Hearthstone expansion Saviors of Uldum and a deeper, more engaging new single-player content Tombs of Terror during the quarter, which is expected to have boosted Hearthstone’s user growth in the third quarter.

Hearthstone players enjoyed regular content updates and free in-game events including Rise of Shadows and Dalaran Heist single-player adventure released in the last reported quarter, which is expected to have engaged users in the to-be-reported quarter.

Additionally, expanding content and updates made to Call of Duty: Black Ops 4 in the third quarter is expected to have positively impacted user engagement levels and in turn revenues.

Call of Duty Mobile’s soft launch in Canada and Australia during the quarter also received positive response from users.

The seasonal release in July, Operation Apocalypse Z, introduced free new content and updates across the game, which is expected to have driven net bookings from in-game items in the third quarter.

Notably, the company reported that Call of Duty: Modern Warfare Beta launched on Sep 12, delivered new franchise records in two weeks with most users, hours played, and highest peak concurrent number of players across PlayStation 4, Xbox One, and PC combined. This is expected to have impacted franchise user growth in the quarter.

Moreover, Crash Team Racing: Nitro-Fueled, which was launched in the last reported quarter, is also expected to have contributed to top-line growth. Per management, the game received tremendous response from users during the quarter.

Further, World of Warcraft subscribers are expected to have increased in the to-be-reported quarter, following the much anticipated release of World of Warcraft Classic in August.

Another division, King continued to deliver innovative features across its portfolio in the third-quarter. It is likely to have benefited from advertising revenues and Candy Crush Friends Saga new augmented reality feature Hungry Yeti that boosted user engagement.

However, intensifying competition in the video game space from the likes of EA, Take-Two Interactive and Gluu Mobile is likely to have hurt top-line growth in the third quarter.

Additionally, increased operating expenses, particularly selling & marketing, are likely to have kept margins under pressure.

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.

Activision has an Earnings ESP of +24.30% and a Zacks Rank #1. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks to Consider

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

iHeartMedia IHRT has an Earnings ESP of +3.17% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Liberty Broadband LBRDK has an Earnings ESP of +5.75% and a Zacks Rank #2.

Twin River Worldwide TRWH has an Earnings ESP of +13.25% and a Zacks Rank #2.

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