Australia markets closed
  • ALL ORDS

    7,709.50
    +21.50 (+0.28%)
     
  • ASX 200

    7,493.80
    +25.50 (+0.34%)
     
  • AUD/USD

    0.7117
    -0.0000 (-0.00%)
     
  • OIL

    81.91
    +0.90 (+1.11%)
     
  • GOLD

    1,925.70
    -4.30 (-0.22%)
     
  • BTC-AUD

    32,278.47
    -310.38 (-0.95%)
     
  • CMC Crypto 200

    520.56
    -6.62 (-1.26%)
     
  • AUD/EUR

    0.6536
    +0.0007 (+0.11%)
     
  • AUD/NZD

    1.0950
    -0.0010 (-0.09%)
     
  • NZX 50

    12,036.05
    +12.59 (+0.10%)
     
  • NASDAQ

    12,051.48
    +236.79 (+2.00%)
     
  • FTSE

    7,767.73
    +6.62 (+0.09%)
     
  • Dow Jones

    33,949.41
    +205.57 (+0.61%)
     
  • DAX

    15,151.98
    +19.13 (+0.13%)
     
  • Hang Seng

    22,688.90
    +122.12 (+0.54%)
     
  • NIKKEI 225

    27,382.56
    +19.81 (+0.07%)
     

Electronic Arts (EA) Up 1.7% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Electronic Arts (EA). Shares have added about 1.7% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Electronic Arts due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Electronic Arts’ Q2 Earnings and Revenues Increase Y/Y

Electronic Arts reported second-quarter fiscal 2023 earnings of $1.07 per share, which increased 4.9% year over year.

Revenues increased 4.3% year over year to $1.90 billion, driven by strength in EA SPORTS portfolio and multi-platform live services business.

The Zacks Consensus Estimate for earnings and revenues was pegged at $1.35 per share and $1.78 billion, respectively.

Net bookings decreased 5.2% year over year to $1.75 billion.

Quarter Details

EA’s full-game revenues (31.6% of total revenues) decreased 2.4% year over year to $602 million. Full-game download revenues decreased 3% year over year to $328 million. Revenues from packaged goods declined 2% year over year to $274 million.

Live services and other revenues (68.4% of total revenues) rose 7.7% year over year to $1.30 billion.

Based on platforms, revenues from consoles decreased 3% year over year to $1.16 billion in the reported quarter. Revenues from PC & Other increased 12% year over year to $423 million. Revenues from the mobile platform increased 27% year over year to $320 million.

Operating Details

EA’s GAAP gross profit rose 8.3% from the year-ago quarter’s levels to $1.44 billion. Gross margin expanded 280 basis points (bps) on a year-over-year basis to 75.7%.

Operating expenses increased 2.3% year over year to $1.01 billion. As a percentage of revenues, operating expenses contracted 100 bps on a year-over-year basis to 53.3%.

Operating income on a GAAP basis increased 25.6% year over year to $427 million. The operating margin expanded 380 bps year over year to 22.4% in the reported quarter.

Balance Sheet and Cash Flow

As of Sep 30, 2022, EA had $1.53 billion in cash and short-term investments compared with $2.41 billion as of Jun 30, 2022.

Net cash used in operating activities in the reported quarter was $112 million against net cash used in operating activities of $78 million in the previous quarter.

EA repurchased 2.6 million shares for $325 million during the quarter, bringing the total for the trailing twelve months to 10 million shares for $1.295 billion.

EA paid a cash dividend of $0.19 per share during the quarter for a total of $53 million. The company also declared a quarterly cash dividend of $0.19 per share. The dividend will be paid out on Dec 21, 2022, to shareholders of record as of the close of business on Nov 30, 2022.

Guidance

For third-quarter fiscal 2023, EA expects GAAP revenues between $1.825 billion and $1.925 billion and earnings in the range of 43-59 cents per share. Net bookings are expected to be between $2.425 billion and $2.525 billion.

For fiscal 2023, EA expects revenues in the range of $7.55-$7.75 billion and diluted earnings of $3.11 to $3.34 per share. The company expects net bookings for the year to be between $7.65 billion and $7.85 billion.

Operating cash flow is estimated to be in the band of $1.6 billion to $1.65 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 6.8% due to these changes.

VGM Scores

At this time, Electronic Arts has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Electronic Arts has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Electronic Arts is part of the Zacks Toys - Games - Hobbies industry. Over the past month, Mattel (MAT), a stock from the same industry, has gained 0.9%. The company reported its results for the quarter ended September 2022 more than a month ago.

Mattel reported revenues of $1.76 billion in the last reported quarter, representing a year-over-year change of -0.4%. EPS of $0.82 for the same period compares with $0.84 a year ago.

Mattel is expected to post earnings of $0.29 per share for the current quarter, representing a year-over-year change of -45.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -2%.

Mattel has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

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

Electronic Arts Inc. (EA) : Free Stock Analysis Report

Mattel, Inc. (MAT) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research