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Why Is Electronic Arts (EA) Up 7.6% 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 added about 7.6% in that time frame, outperforming 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 Rise Y/Y
Electronic Arts reported second-quarter fiscal 2024 earnings of $1.47 per share, which jumped 37.4% year over year.
Revenues increased 0.5% year over year to $1.91 billion, driven by new releases, continued live services growth and healthy engagement.
The Zacks Consensus Estimate for earnings was pegged at $1.27 per share. The consensus mark for revenues was pinned at $1.78 billion.
Net bookings for the second quarter were $1.82 billion, up 3.8% year over year or 5% in constant currency (cc). It beat the Zacks Consensus Estimate for net bookings by 3.03%.
Live services net bookings were $1.129 billion, up 1% year over year or up 2% in cc.
Quarter Details
EA’s full-game revenues (32.4% of total revenues) increased 3.2% year over year to $621 million. The figure beat the Zacks Consensus Estimate by 16.89%.
Full-game download revenues increased 5% year over year to $346 million. The figure beat the Zacks Consensus Estimate by 2.75%.
Revenues from packaged goods remained flat year over year at $275 million. The figure beat the Zacks Consensus Estimate by 41.37%.
Live services and other revenues (67.6% of total revenues) declined 0.7% year over year to $1.29 billion. The figure missed the Zacks Consensus Estimate by 3.51%.
Based on platforms, revenues from consoles increased 2% year over year to $1.18 billion in the reported quarter. The figure beat the Zacks Consensus Estimate by 5.31%.
Revenues from PC & Other remained flat year over year at $423 million. The figure missed the consensus mark by 3.62%.
Revenues from the mobile platform decreased 5% year over year to $304 million. The figure missed the Zacks Consensus Estimate by 0.43%.
Gaming Metrics
EA SPORTS Madden NFL 24 delivered a strong launch in the quarter, with net bookings up 6% year over year, as exciting new in-game innovations continued to drive growth across player acquisition and engagement.
EA SPORTS FC was a huge achievement for EA. In the second quarter, the total global football business significantly exceeded expectations. Net bookings grew 41% year over year, driven by the continued momentum of FIFA 23, including triple-digit mobile net bookings growth and strong demand for the release of EA SPORTS FC 24.
EA SPORTS FC 24, within the first four weeks of global launch, had more than 14.5 million active accounts.
Apex Legends, though down on a year-over-year basis, delivered net bookings above the company’s expectations, with Season 18 driving greater-than-anticipated player acquisition and monetization. Apex Legends remains one of the strongest franchises in the industry. The company is already working on Season 19.
Operating Details
EA’s GAAP gross profit rose 1.1% from the year-ago quarter’s levels to $1.46 billion. Gross margin expanded 40 basis points (bps) on a year-over-year basis to 76.2%.
Operating expenses increased 6.5% year over year to $1.081 billion. As a percentage of revenues, operating expenses expanded 320 bps on a year-over-year basis to 56.5%.
Operating income on a GAAP basis decreased 11.7% year over year to $377 million. The operating margin contracted 270 bps year over year to 28.2% in the reported quarter.
Balance Sheet and Cash Flow
As of Sep 30, 2023, EA had $2.55 billion in cash and short-term investments compared with $1.87 billion as of Jun 30, 2023.
Net cash provided by operating activities in the reported quarter was $112 million against net cash used in operating activities of $359 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 Dec 20, 2023 to shareholders of record as of the close of business on Nov 29, 2023.
Guidance
For third-quarter fiscal 2024, EA expects GAAP revenues between $1.825 billion and $2.025 billion and diluted earnings in the range of $0.75-$1.01 per share. Net bookings are expected between $2.25 billion and $2.45 billion.
For fiscal 2024, EA expects revenues in the range of $7.3-$7.7 billion and diluted earnings of $4.1-$4.66 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 $1.95-$2.1 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
Currently, Electronic Arts has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, 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 downward 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.
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Why Is Electronic Arts (EA) Up 7.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Electronic Arts (EA - Free Report) . Shares have added about 7.6% in that time frame, outperforming 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 Rise Y/Y
Electronic Arts reported second-quarter fiscal 2024 earnings of $1.47 per share, which jumped 37.4% year over year.
Revenues increased 0.5% year over year to $1.91 billion, driven by new releases, continued live services growth and healthy engagement.
The Zacks Consensus Estimate for earnings was pegged at $1.27 per share. The consensus mark for revenues was pinned at $1.78 billion.
Net bookings for the second quarter were $1.82 billion, up 3.8% year over year or 5% in constant currency (cc). It beat the Zacks Consensus Estimate for net bookings by 3.03%.
Live services net bookings were $1.129 billion, up 1% year over year or up 2% in cc.
Quarter Details
EA’s full-game revenues (32.4% of total revenues) increased 3.2% year over year to $621 million. The figure beat the Zacks Consensus Estimate by 16.89%.
Full-game download revenues increased 5% year over year to $346 million. The figure beat the Zacks Consensus Estimate by 2.75%.
Revenues from packaged goods remained flat year over year at $275 million. The figure beat the Zacks Consensus Estimate by 41.37%.
Live services and other revenues (67.6% of total revenues) declined 0.7% year over year to $1.29 billion. The figure missed the Zacks Consensus Estimate by 3.51%.
Based on platforms, revenues from consoles increased 2% year over year to $1.18 billion in the reported quarter. The figure beat the Zacks Consensus Estimate by 5.31%.
Revenues from PC & Other remained flat year over year at $423 million. The figure missed the consensus mark by 3.62%.
Revenues from the mobile platform decreased 5% year over year to $304 million. The figure missed the Zacks Consensus Estimate by 0.43%.
Gaming Metrics
EA SPORTS Madden NFL 24 delivered a strong launch in the quarter, with net bookings up 6% year over year, as exciting new in-game innovations continued to drive growth across player acquisition and engagement.
EA SPORTS FC was a huge achievement for EA. In the second quarter, the total global football business significantly exceeded expectations. Net bookings grew 41% year over year, driven by the continued momentum of FIFA 23, including triple-digit mobile net bookings growth and strong demand for the release of EA SPORTS FC 24.
EA SPORTS FC 24, within the first four weeks of global launch, had more than 14.5 million active accounts.
Apex Legends, though down on a year-over-year basis, delivered net bookings above the company’s expectations, with Season 18 driving greater-than-anticipated player acquisition and monetization. Apex Legends remains one of the strongest franchises in the industry. The company is already working on Season 19.
Operating Details
EA’s GAAP gross profit rose 1.1% from the year-ago quarter’s levels to $1.46 billion. Gross margin expanded 40 basis points (bps) on a year-over-year basis to 76.2%.
Operating expenses increased 6.5% year over year to $1.081 billion. As a percentage of revenues, operating expenses expanded 320 bps on a year-over-year basis to 56.5%.
Operating income on a GAAP basis decreased 11.7% year over year to $377 million. The operating margin contracted 270 bps year over year to 28.2% in the reported quarter.
Balance Sheet and Cash Flow
As of Sep 30, 2023, EA had $2.55 billion in cash and short-term investments compared with $1.87 billion as of Jun 30, 2023.
Net cash provided by operating activities in the reported quarter was $112 million against net cash used in operating activities of $359 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 Dec 20, 2023 to shareholders of record as of the close of business on Nov 29, 2023.
Guidance
For third-quarter fiscal 2024, EA expects GAAP revenues between $1.825 billion and $2.025 billion and diluted earnings in the range of $0.75-$1.01 per share. Net bookings are expected between $2.25 billion and $2.45 billion.
For fiscal 2024, EA expects revenues in the range of $7.3-$7.7 billion and diluted earnings of $4.1-$4.66 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 $1.95-$2.1 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
Currently, Electronic Arts has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, 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 downward 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.