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Activision (ATVI) to Report Q2 Earnings: Is a Beat in Store?

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Activision Blizzard (ATVI - Free Report) is scheduled to report second-quarter 2018 results on Aug 2.

The company’s earnings beat the Zack Consensus Estimate in three of the trailing four quarters, delivering an average positive surprise of 27.98%.

In the last reported quarter, Activision’s adjusted earnings of 38 cents per share beat the Zacks Consensus Estimate by 3 cents and increased 22.6% from the year-ago quarter.

Moreover, the company's net revenues and net bookings were at record $1.96 billion and $1.38 billion respectively, up 13.8% and 15% year over year.

For second-quarter 2018, Activision expects net revenues of $1.55 billion and non-GAAP earnings per share (EPS) of 46 cents per share, driven by strong digital revenues and net bookings on the back of its popular games such as Call of Duty: WWII and Destiny 2.

Activision Blizzard, Inc Price and EPS Surprise


Activision Blizzard, Inc Price and EPS Surprise | Activision Blizzard, Inc Quote

Let’s see how things are shaping up for this announcement.

Key Factors to Watch Out For

Activision’s revenues are expected to be driven by solid in-game purchases, downloadable content and increasing net bookings from its well-known franchises.

Notably, in the last reported quarter, the company saw record in-game net bookings of $1 billion on the back of Call of Duty: WWII and Blizzard’s World of Warcraft. Additionally, net bookings of King digital’s mobile segment were up 13% year over year, the highest since its launch.

Activision’s strength in digital business is proving to be fruitful. In the last reported quarter, the company generated $1.46 billion revenues (75% of total revenues) from its digital channels, up 6% from the year-ago quarter.

Additionally, the company’s monthly active users (MAUs) were 374 million, primarily driven by King’s strong engagement of 285 million MAUs in the last reported quarter.

We also believe that rising viewership and engagement levels for the Overwatch league will drive top line.

However, rising competition from the likes of Electronic Arts (EA - Free Report) , Take-Two Interactive (TTWO - Free Report) and Gluu Mobile (GLUU - Free Report) remains a headwind.

Both, EA and Take-Two have strong gaming lineups that are expected to drive top-line growth as well as increase their market share.

Moreover, the growing popularity of Epic Games’ Fortnite is a concern.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Activision has a Zacks Rank #1 and an Earnings ESP of +1.43%, which indicates a likely positive surprise. You can see the complete list of today’s Zacks #1 Rank stocks here.

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