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Why Is Electronic Arts (EA) Down 4.6% Since Last Earnings Report?
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It has been about a month since the last earnings report for Electronic Arts (EA - Free Report) . Shares have lost about 4.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Electronic Arts due for a breakout? 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 drivers.
Electronic Arts Q1 Earnings Jump, Revenues Rise Y/Y
Electronic Arts reported first-quarter fiscal 2024 earnings of $1.47 per share, which jumped 32.4% year over year.
Revenues increased 8.9% year over year to $1.92 billion, driven by new releases, continued live services growth, healthy engagement and new player acquisition
The Zacks Consensus Estimate for earnings was pegged at $1.01 per share. The consensus mark for revenues was pinned at $1.58 billion.
Net bookings for the first quarter were $1.578 billion, up 21% or 25% in constant currency (cc) year over year. It missed the Zacks Consensus Estimate for net bookings by 0.5%.
Live services net bookings were up 4% year over year, or up 7% in cc. Growth at constant currency was driven by strength in FIFA with rapid growth occurring in Star Wars Jedi: Survivor.
Quarter Details
EA’s full-game revenues (23% of total revenues) increased 29.9% year over year to $443 million. The figure missed the Zacks Consensus Estimate by 9.32%.
Full-game download revenues increased 27% year over year to $301 million. The figure missed the Zacks Consensus Estimate by 5.57%.
Revenues from packaged goods increased 37% year over year to $142 million. The figure missed the Zacks Consensus Estimate by 16.36%.
Live services and other revenues (77% of total revenues) rose 3.9% year over year to $1.48 billion. The figure beat the Zacks Consensus Estimate by 6.28%.
Based on platforms, revenues from consoles increased 12% year over year to $1.16 billion in the reported quarter. The figure beat the Zacks Consensus Estimate by 3.67%.
Revenues from PC & Other increased 12% year over year to $451 million. The figure beat the consensus mark by 2.94%.
Revenues from the mobile platform decreased 5% year over year to $306 million. The figure missed the Zacks Consensus Estimate by 3.83%.
Gaming Metrics
EA rolled out five new high-quality releases, while providing more than 145 content updates across 37 titles during the quarter.
FIFA Ultimate Team engaged tens of millions of fans and daily average users grew 15 %. FIFA Mobile attracted more than 65 million new players in the quarter alone. FIFA Online produced double-digit growth across monthly, weekly and daily average users.
The Sims 4 community continues to reach a broader global audience, welcoming more than four million new players in the quarter.
Apex Legends is one of the strongest franchises and live services in the industry with 18 million active monthly players and an impressive retention rate of more than 70%. After a highly successful 16th season, the company launched Season 17 in May, with new variations of gameplay and monetization.
Operating Details
EA’s GAAP gross profit rose 7.1% from the year-ago quarter’s levels to $1.55 billion. Gross margin contracted 140 basis points (bps) on a year-over-year basis to 80.9%.
Operating expenses increased 0.2% year over year to $1.014 billion. As a percentage of revenues, operating expenses contracted 460 bps on a year-over-year basis to 52.7%.
Operating income on a GAAP basis increased 22.9% year over year to $542 million. The operating margin expanded 320 bps year over year to 28.2% in the reported quarter.
Balance Sheet and Cash Flow
As of Jun 30, 2023, EA had $2.6 billion in cash and short-term investments compared with $2.76 billion as of Mar 31, 2023.
Net cash provided by operating activities in the reported quarter was $359 million against negative 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 12 months to 10.5 million shares for $1.3 billion.
EA has declared a quarterly cash dividend of 19 cents per share of the company’s common stock. The dividend is payable on Sep 20, 2023 to shareholders of record as of the close of business on Aug 30, 2023.
Guidance
For second-quarter fiscal 2024, EA expects GAAP revenues between $1.825 billion and $1.925 billion and diluted earnings in the range of 72-89 cents per share. Net bookings are expected between $1.7 billion and $1.8 billion.
For fiscal 2024, EA expects revenues in the range of $7.3-$7.7 billion and diluted earnings of $3.42 to $3.92 per share.
The company expects net bookings guidance for the year between $7.3 billion and $7.7 billion.
Operating cash flow is estimated in the band of $1.7-$1.85 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -23.53% due to these changes.
VGM Scores
At this time, Electronic Arts has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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 belongs to the Zacks Toys - Games - Hobbies industry. Another stock from the same industry, Mattel (MAT - Free Report) , has gained 4.2% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Mattel reported revenues of $1.09 billion in the last reported quarter, representing a year-over-year change of -12%. EPS of $0.10 for the same period compares with $0.18 a year ago.
For the current quarter, Mattel is expected to post earnings of $0.83 per share, indicating a change of +1.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.9% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Mattel. Also, the stock has a VGM Score of F.
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Why Is Electronic Arts (EA) Down 4.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Electronic Arts (EA - Free Report) . Shares have lost about 4.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Electronic Arts due for a breakout? 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 drivers.
Electronic Arts Q1 Earnings Jump, Revenues Rise Y/Y
Electronic Arts reported first-quarter fiscal 2024 earnings of $1.47 per share, which jumped 32.4% year over year.
Revenues increased 8.9% year over year to $1.92 billion, driven by new releases, continued live services growth, healthy engagement and new player acquisition
The Zacks Consensus Estimate for earnings was pegged at $1.01 per share. The consensus mark for revenues was pinned at $1.58 billion.
Net bookings for the first quarter were $1.578 billion, up 21% or 25% in constant currency (cc) year over year. It missed the Zacks Consensus Estimate for net bookings by 0.5%.
Live services net bookings were up 4% year over year, or up 7% in cc. Growth at constant currency was driven by strength in FIFA with rapid growth occurring in Star Wars Jedi: Survivor.
Quarter Details
EA’s full-game revenues (23% of total revenues) increased 29.9% year over year to $443 million. The figure missed the Zacks Consensus Estimate by 9.32%.
Full-game download revenues increased 27% year over year to $301 million. The figure missed the Zacks Consensus Estimate by 5.57%.
Revenues from packaged goods increased 37% year over year to $142 million. The figure missed the Zacks Consensus Estimate by 16.36%.
Live services and other revenues (77% of total revenues) rose 3.9% year over year to $1.48 billion. The figure beat the Zacks Consensus Estimate by 6.28%.
Based on platforms, revenues from consoles increased 12% year over year to $1.16 billion in the reported quarter. The figure beat the Zacks Consensus Estimate by 3.67%.
Revenues from PC & Other increased 12% year over year to $451 million. The figure beat the consensus mark by 2.94%.
Revenues from the mobile platform decreased 5% year over year to $306 million. The figure missed the Zacks Consensus Estimate by 3.83%.
Gaming Metrics
EA rolled out five new high-quality releases, while providing more than 145 content updates across 37 titles during the quarter.
FIFA Ultimate Team engaged tens of millions of fans and daily average users grew 15 %. FIFA Mobile attracted more than 65 million new players in the quarter alone. FIFA Online produced double-digit growth across monthly, weekly and daily average users.
The Sims 4 community continues to reach a broader global audience, welcoming more than four million new players in the quarter.
Apex Legends is one of the strongest franchises and live services in the industry with 18 million active monthly players and an impressive retention rate of more than 70%. After a highly successful 16th season, the company launched Season 17 in May, with new variations of gameplay and monetization.
Operating Details
EA’s GAAP gross profit rose 7.1% from the year-ago quarter’s levels to $1.55 billion. Gross margin contracted 140 basis points (bps) on a year-over-year basis to 80.9%.
Operating expenses increased 0.2% year over year to $1.014 billion. As a percentage of revenues, operating expenses contracted 460 bps on a year-over-year basis to 52.7%.
Operating income on a GAAP basis increased 22.9% year over year to $542 million. The operating margin expanded 320 bps year over year to 28.2% in the reported quarter.
Balance Sheet and Cash Flow
As of Jun 30, 2023, EA had $2.6 billion in cash and short-term investments compared with $2.76 billion as of Mar 31, 2023.
Net cash provided by operating activities in the reported quarter was $359 million against negative 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 12 months to 10.5 million shares for $1.3 billion.
EA has declared a quarterly cash dividend of 19 cents per share of the company’s common stock. The dividend is payable on Sep 20, 2023 to shareholders of record as of the close of business on Aug 30, 2023.
Guidance
For second-quarter fiscal 2024, EA expects GAAP revenues between $1.825 billion and $1.925 billion and diluted earnings in the range of 72-89 cents per share. Net bookings are expected between $1.7 billion and $1.8 billion.
For fiscal 2024, EA expects revenues in the range of $7.3-$7.7 billion and diluted earnings of $3.42 to $3.92 per share.
The company expects net bookings guidance for the year between $7.3 billion and $7.7 billion.
Operating cash flow is estimated in the band of $1.7-$1.85 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -23.53% due to these changes.
VGM Scores
At this time, Electronic Arts has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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 belongs to the Zacks Toys - Games - Hobbies industry. Another stock from the same industry, Mattel (MAT - Free Report) , has gained 4.2% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Mattel reported revenues of $1.09 billion in the last reported quarter, representing a year-over-year change of -12%. EPS of $0.10 for the same period compares with $0.18 a year ago.
For the current quarter, Mattel is expected to post earnings of $0.83 per share, indicating a change of +1.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.9% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Mattel. Also, the stock has a VGM Score of F.