Electronic Arts Inc. (NASDAQ:
ERTS) is scheduled to reports its Q4 2010 results after the market closes on May 11, 2010. Stronger sales and an overall positive industry outlook are expected to drive earnings this quarter. Moreover, 1) positive NPD comps; 2) upcoming E3 trade show in early June; 3) new motion controlled services from Microsoft/Sony could boost hardware sales in Q4; and 4) potential for hardware price cuts are expected to boost growth.
Electronic Arts Inc. operates in two principal business segments globally: EA Core business segment: creation, marketing and distribution of entertainment software and the EA.com business segment: creation, marketing and distribution of entertainment software which can be played or sold online.
As for Q3 2010, GAAP net revenue, which includes the impact of deferred net revenue adjustments, was $1.243 billion as compared with $1.654 billion for the prior year. During the quarter, EA had a net revenue deferral of $103 million related to certain online-enabled packaged goods and digital content as compared with $88 million in the Q3 of the prior year. This $103 million deferral will be recognized in future quarters. Non-GAAP net revenue for the quarter was $1.346 billion, down 23% as compared with $1.742 billion for the prior year. GAAP net loss for the quarter, including the impact of deferred net revenue, was $82 million as compared with a net loss of $641 million for the prior year. GAAP diluted loss per share was $0.25 as compared with GAAP diluted loss per share of $2.00 for the prior year. Non-GAAP net income was $109 million as compared with a non-GAAP net income of $179 million a year ago. Non-GAAP diluted earnings per share was $0.33 as compared with a non-GAAP diluted earnings per share of $0.56 for the prior year. EA Mobile(TM) generated $57 million of non-GAAP net revenue in the quarter, an increase of 14% YoY. EA's online games subscribers totalled 1.9 million in the quarter, which includes Pogo, as well as massively multiplayer online (MMO) subscribers.
Analysts' estimates for Q4 2010 range from a low of $0.02 to a high of $0.08, compared to a consensus estimate of $0.05, with number of estimates being 15 and the co-efficient variance 32.97. Q4 2010 revenue and EPS are expected to reach $858M and $0.07 from $825M and $0.04 driven by stronger sales of key titles - partly offset by a strengthening USD (~$15M impact from planned FX rates). Upside is likely from the strength of Battlefield Bad Company 2 (~3M units) and Mass Effect (~3M) will offset downward pressure on catalog sales. Top line upside is expected and higher incremental margin (40%) is likely to drive upside in EPS - partly offset by higher R&D due to strengthening CAD/USD.
The stock closed $ $19.37 on April 30, 2010 and most analysts' recommend this stock as a relative Overweight with an average price target of $20.00.
