Companies and Markets

Earnings Outlook: EA earnings: What to expect

Electronic Arts Inc.’s upcoming earnings will show how spending on video games has held up in the current economic climate.

The Tuesday afternoon report kicks off earnings season for the major publishers, with reports from Take-Two Interactive Software Inc.

and Activision Blizzard Inc.

to come next week. But EA

might be a bit of a special case, since consumers may be less inclined to cut back their spending on the company’s trademark sports titles.

Here’s what to expect when EA posts its results after the closing bell.

What to expect

Earnings: Analysts tracked by FactSet expect EA to post $3.05 a share in adjusted earnings for the fiscal third quarter, down from $3.17 a share a year before. According to Estimize, which crowdsources projections from hedge funds, academics, and others, the average estimate calls for $3.00 a share.

Revenue: The FactSet consensus is for $1.93 billion in revenue, down from $1.80 billion a year before.

Analysts expect EA’s bookings, which account for deferred revenue, to come in at $2.48 billion, down from $2.58 billion a year before. Those contributing to Estimize were projecting $2.46 billion.

Stock movement: EA shares have risen following each of the company’s last five earnings reports. The stock has declined 2% over the past 12 months, though it’s risen more than 5% to start 2023.

Of the 32 analysts tracked by FactSet who cover EA’s stock, 23 have buy ratings and nine have hold ratings, with an average price target of $147.74.

What to watch for

While BMO Capital Markets analyst Gerrick Johnson expects that EA’s results will show impacts from economic pressures on consumer wallets, he also thinks that the company has “resilient” core titles.

“We think EA’s sports games, in particular, generate sticky bookings,” he wrote. “As gamers narrow their range of title purchases owing to budgetary pressure, we think they will stick with core, multi-player games like ‘Madden’ and ‘FIFA.’ Meanwhile, spending in these games, with passionate fans, may have outperformed expectations.”

Wedbush analyst Nick McKay said that Wall Street’s net bookings expectations for the latest quarter “may be a bit high,” especially “if ‘Apex Legends’ got a meaningful hit from holiday competition.”

He’ll also be watching to see how the company benefited from the World Cup.

“Although FIFA Ultimate Team got a lift from the World Cup, several key teams bowed out of the real-world tournament relatively early, with their fan bases potentially following suit within FUT [FIFA Ultimate Team],” McKay wrote.

Matthew Thornton of Truist Securities has his eyes beyond the December quarter as he hopes for hints about the upcoming fiscal year.

“We expect key investor focus to be any color on FY24, where we (and we believe investors) view consensus as a slightly high hurdle,” he wrote.

Thornton added that “seasonality is historically less favorable” from February to May “given limited visibility into the forward-year slate.” He thinks that will be “the case this year unless the company provides guidance on the F3Q call.”


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