GameStop Corporation ( GME - Analyst Report ) is one of the leading retailers of software, hardware, and game accessories for video game systems and personal computers. The company’s strategy is to grow through store expansions in favorable localities, by providing the largest title collection of video games, and by leveraging its first-to-market distribution network to offer the latest hardware and software releases.

In the paragraphs that follow, we cover the recent earnings announcement, subsequent estimate revisions by analysts as well as the Zacks Rank and long-term recommendation for the stock.

Last Quarter Synopsis

GameStop reported its fourth-quarter 2011 results on March 22, 2012. Strong digital sales facilitated the company to post fourth-quarter 2011 earnings of $1.73 a share, up 10.2% from $1.57 earned in the prior-year quarter. Moreover, earnings were a penny ahead of the Zacks Consensus Estimate.

The company posted total revenue of $3,578.6 million, down 3% from $3,692.8 million in the year-ago quarter. Moreover, total revenue came below the Zacks Consensus Revenue Estimate of $3,709 million. The retailer stated that comparable-store sales decreased 3.6% during the quarter, reflecting dismal sales across hardware.

(Read our full coverage on this earnings report: GameStop a Penny Ahead)

Agreement of Estimate Revisions

The agreement of estimate revisions indicates that the majority of the analysts were unidirectional in making revisions to their estimates for the upcoming quarters following GameStop’s results and guidance.

In the last 7 days, 12 out of 15 analysts covering the stock lowered their estimates, whereas only 1 analyst raised the same for the first quarter of 2012. For the second quarter, 10 analysts revised their estimates upward and only 3 made a downward revision.

For fiscal 2012, 9 analysts increased their estimates, while one analyst revised the estimate in the downward direction in the last 7 days. As for fiscal 2013, 4 analysts made an upward revision to the estimate, while one lowered the same.

What Drives Estimate Revisions

The analysts have been making adjustments to their estimates to better correlate with the company’s guidance.

The company’s soft projection for the first quarter of 2012 kept majority of the analysts on the back foot, and their negative sentiments were clearly palpable from the downward revisions of the estimates.

GameStop anticipates total sales to decline in the range of 7.5% to 9.5%, whereas comparable-store sales to decline between 7.5% and 9%. The company projected earnings in the range of 52 cents to 55 cents a share, representing a decline of 7.1% to 1.8%, respectively.

However, a healthy outlook for fiscal 2012 brought some cheers to the analysts, who went on to revise their estimates upwards. For fiscal year 2012, GameStop forecasted earnings between $3.10 and $3.30 per share, reflecting a year-over-year growth of 8% to 15%.

GameStop projected revenue growth of 1% to 5% for fiscal year. The company hinted that sales growth in fiscal 2012 will be buoyed by an increase in digital sales, pre-owned video game products and mobile business initiatives.

Magnitude of Estimate Revisions

The magnitude of estimate revisions by the analysts is clearly reflected through changes in the Zacks Consensus Estimates.

The Zacks Consensus Estimate for the first quarter of 2012 dropped 7 cents to 52 cents a share in the last 7 days. For the second quarter, the Estimate climbed 4 cents to 28 cents a share.

For fiscal 2012 and 2013, the Zacks Consensus Estimates jumped 5 cents and 6 cents to $3.20 and $3.47, respectively, in the last 7 days.

Our Say

GameStop continues to branch out and transform as a mixed retailer of physical and digital gaming and electronics products. The company’s venture in digital, iDevice and gaming tablet businesses would be accretive to its results. The company’s buy-sell-trade model of selling new games and buying back used games and PowerUp Rewards program makes it popular destination for shopping.

However, consumers increasing accessibility to video games and PC entertainment software over the Internet could hit the sales of packaged goods and used games, and impede future growth.

Currently, we have a long-term ‘Neutral’ recommendation on the stock. Moreover, GameStop, which faces stiff competition from Amazon.com Inc. ( AMZN - Analyst Report ) , holds a Zacks #2 Rank that translates into a short-term Buy rating.