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Can Take Two's (TTWO) New Expansion Packs Aid Q4 Earnings?

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Take Two Interactive (TTWO - Free Report) is scheduled to report fourth-quarter fiscal 2019 results on May 13.

Notably, the company’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average being 24.3%.

In the last reported quarter, Take Two delivered earnings of $1.57 per share compared with 21 cents in the year-ago quarter. Net revenues surged 159.7% from the year-ago quarter to $1.25 billion.

Take-Two Interactive Software, Inc. Price and EPS Surprise

Take-Two Interactive Software, Inc. Price and EPS Surprise | Take-Two Interactive Software, Inc. Quote

The Zacks Consensus Estimate for fourth-quarter earnings has remained unchanged at 78 cents per share over the past seven days, indicating an increase of 13% from the year-ago period. Management projects GAAP earnings between 67 cents and 77 cents per share.

The consensus mark for revenues is pegged at $506.9 million, up 23% from the year-ago quarter. Management expects GAAP net revenues to be in a band of $530 to $580 million.

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

Factors at Play in Q4

Take Two launched the second expansion pack, Gathering Storm for Sid Meier’s Civilization VI in fourth-quarter fiscal 2019. The latest expansion pack is the biggest and is equipped with a lot of new features. It is expected to add to the company’s user base.

Additionally, the company and Firaxis Games, the game’s developer sought to boost engagement levels through new features. This is expected to increase the time spent on the game.

Moreover, Take Two’s to-be-reported quarter revenues and net bookings are likely to benefit from the launch of latest expansion pack of WWE 2K19 - Rising Stars Pack. Notably, WWE 2K19 was one of the main contributors to net revenues, digitally-delivered net revenues and net bookings in third-quarter fiscal 2019.

This apart, the release of free-to-play mobile game, Tasty Town, is anticipated to help the company witness growth in mobile player engagement in fourth-quarter fiscal 2019.
Further, successful monetization of the games released at the end of third-quarter fiscal 2019 may benefit Take Two. Notably, new expansions pack for WWE 2K19, New Moves Pack, and Borderlands 2 VR were released at the end of the last reported quarter. Borderlands 2 VR, which allows players to engage virtually with the game, is likely to increase user stickiness in fourth-quarter fiscal 2019.

However, rise in selling & marketing and research & development expenses are likely to hurt margins in the to-be-reported quarter. Moreover, increase in expenses to continue partnerships, including the extended partnership with National Basketball Association (NBA) in fourth-quarter fiscal 2019, may hurt profits.

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.  Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Take Two has a Zacks Rank #3 and an Earnings ESP of +2.73%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks to Consider

Here are some companies from the broader sector, which, per our model, also have the right combination of elements to post earnings beat this quarter:

lululemon athletica inc. (LULU - Free Report) has an Earnings ESP of +0.51% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Rent-A-Center, Inc. (RCII - Free Report) has an Earnings ESP of +2.13% and a Zacks Rank #1.

V.F. Corporation (VFC - Free Report) has an Earnings ESP of +1.64% and a Zacks Rank #2.

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