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Take Two (TTWO) to Report Q1 Earnings: What's in the Cards?

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Take Two Interactive (TTWO - Free Report) is set to report first-quarter fiscal 2020 results on Aug 5.

Notably, the company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 25.3%.

In the last reported quarter, Take Two delivered GAAP earnings of 50 cents per share, which declined 35% year over year. Net revenues increased 19.7% from the year-ago quarter to $539 million.

For the fiscal first quarter, Take Two expects GAAP net revenues of $485-$535 million. Net bookings are projected between $310 million and $360 million. Moreover, GAAP earnings are anticipated between 65 cents and 75 cents per share.

The Zacks Consensus Estimate for first-quarter revenues stands at $354.5 million, indicating 22.9% growth from the figure reported in the year-ago quarter.

The consensus mark for earnings is pegged at 3 cents, unchanged over the past 30 days.

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

Factors at Play

Take Two’s growth is expected to be primarily driven by its popular franchises — Grand Theft Auto (GTA), Red Dead Redemption and NBA. The company is also benefiting from a solid increase in recurrent consumer spending.

Further, acquisition of Barcelona-based, free-to-play mobile game developer, Social Point, is helping Take Two penetrate the rapidly growing mobile gaming market.

During the second quarter, the division launched Word Life, expanding the mobile gaming portfolio. Moreover, continued user adoption of Dragon City, Monster Legends and Tasty Town are expected to drive second-quarter bookings.

Additionally, the release of NBA 2K Mobile, Borderlands: Game of the Year Edition, and Kerbal Space Program: Breaking Ground expansion pack must have attracted players in the to-be-reported quarter. This is expected to drive the top line and bookings.

However, higher operating expenses, particularly selling & marketing, are likely to hurt margins. The company continues to face stiff competition in the video game market from the likes of EA, Activision Blizzard, Gluu Mobile and Zynga.

What Our Model Says

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

Take Two has a Zacks Rank #2 but an Earnings ESP of -25.37%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

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

CACI International (CACI - Free Report) has an Earnings ESP of +3.77% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Discovery has an Earnings ESP of +5.05% and a Zacks Rank #3.

SeaWorld Entertainment has an Earnings ESP of +11.54% and a Zacks Rank #3.

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