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Why Is Electronic Arts (EA) Up 0.3% Since Last Earnings Report?
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A month has gone by since the last earnings report for Electronic Arts (EA - Free Report) . Shares have added about 0.3% in that time frame, underperforming 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 & Revenues Decline Y/Y
Electronic Arts reported second-quarter fiscal 2021 earnings of 63 cents per share, which plunged 78.2% year over year.
Revenues also declined 14.6% year over year to $1.15 billion.
The Zacks Consensus Estimate for earnings and revenues was pegged at 2 cents per share and $955.6 million, respectively.
Net bookings decreased 30.7% year over year to $910 million but was better than management’s guidance, driven by robust live services performance. Unfavorable forex hit revenues by $23 million.
Moreover, fiscal second-quarter bookings suffered from the late launch of Madden NFL 21 as compared with Madden NFL 20. Moreover, launch of FIFA 21 in the third quarter instead of second, hurt growth.
Quarter Details
EA’s full-game revenues (24.5% of total revenues) declined 51.4% year over year to $282 million. Net bookings from full games decreased 31% year over year to $266 million.
Further segregating full-game revenues, full-game download revenues decreased 10% year over year to $163 million. Revenues from packaged goods plunged 70% year over year to $119 million.
However, live services and other revenues (75.5% of total revenues) rose 13.2% year over year to $869 million. Net bookings from live services fell 5% year over year to $644 million.
Live services performance was primarily driven by Madden Ultimate Team and FIFA Ultimate Team.
Notably, Apex Legends net bookings increased 24% year on year. The game is now expected to deliver more than $500 million in net bookings this fiscal year.
Based on platforms, revenues from console decreased 23% year over year to $714 million in the reported quarter. Net bookings from console plunged 45% year over year to $513 million.
Revenues from PC/browser were unchanged at $249 million. Net bookings from PC/browser increased 4% year over year to $225 million.
Revenues from mobile platform increased 6% year over year to $188 million. Net bookings from mobile increased 4% year over year to $172 million.
Important Game & Player Metrics
EA launched Madden NFL 21, Rocket Arena, Star Wars: Squadrons and UFC 4 in the reported quarter. Madden NFL 21 has nearly 30% more players on a year-over-year basis.
Moreover, since its launch, FIFA 20 has reached nearly 35 million players on console and PC.
Further, EA Play now has more than 6.5 million paid subscribers, reflecting the growing popularity of the platform.
Additionally, during the fiscal year, EA launched more than 125 games and content packs on the Steam platform.
Operating Details
EA’s GAAP gross profit decreased 8.3% from the year-ago quarter to $865 million. However, gross margin expanded 520 basis points (bps) on a year-over-year basis to 75.2%.
Operating expenses increased 6.1% from the year-ago quarter to $716 million. As a percentage of revenues, operating expenses increased from 50.1% in the year-ago quarter to 62.2% in the reported quarter.
As a percentage of revenues, marketing & sales (M&S) and research & development (R&D) expenses increased 790 bps and 230 bps, respectively. Moreover, general & administrative (G&A) expenses increased 210 bps in the reported quarter.
Operating income on a GAAP basis decreased 44.4% year over year to $149 million. Operating margin contracted 690 bps on a year-over-year basis to 12.9%.
Balance Sheet and Cash Flow
As of Sep 30, 2020, EA had $6.03 billion in cash and short-term investments compared with $5.96 billion as of Jun 30, 2020.
Net cash from operating activities in the reported quarter was $61 million compared with $378 billion in the previous quarter and $37 million in the year-ago quarter.
EA announced a new $2.6 billion, two-year stock repurchase program. The company also declared a quarterly cash dividend of 17 cents per share. The dividend is payable on Dec 23, 2020, to shareholders of record as of the close of business on Dec 2.
Guidance
For the third quarter of fiscal 2021, EA expects GAAP revenues of $1.675 billion. Net bookings are expected to be $2.350 billion, primarily benefiting from the launch of FIFA 21.
EA anticipates earnings to be 61 cents per share.
For fiscal 2021, EA still expects revenues of $5.625 billion and net bookings of $5.95 billion. Forex is expected to have a negative impact of $80 million.
Moreover, postponement of two EA Originals titles to fiscal 2022 from fiscal 2021 is expected to hurt current fiscal’s top-line by roughly $120 million.
Additionally, earnings are expected to be $3.15 per share, better than the previous guidance of $2.97 per share.
Operating cash flow is estimated to be $1.85 billion.
Note: The EPS data mentioned in the text of this section differs from the rest of report due to the difference in calculation or consideration of one-time items.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
VGM Scores
Currently, Electronic Arts has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Electronic Arts has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Why Is Electronic Arts (EA) Up 0.3% Since Last Earnings Report?
A month has gone by since the last earnings report for Electronic Arts (EA - Free Report) . Shares have added about 0.3% in that time frame, underperforming 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 & Revenues Decline Y/Y
Electronic Arts reported second-quarter fiscal 2021 earnings of 63 cents per share, which plunged 78.2% year over year.
Revenues also declined 14.6% year over year to $1.15 billion.
The Zacks Consensus Estimate for earnings and revenues was pegged at 2 cents per share and $955.6 million, respectively.
Net bookings decreased 30.7% year over year to $910 million but was better than management’s guidance, driven by robust live services performance. Unfavorable forex hit revenues by $23 million.
Moreover, fiscal second-quarter bookings suffered from the late launch of Madden NFL 21 as compared with Madden NFL 20. Moreover, launch of FIFA 21 in the third quarter instead of second, hurt growth.
Quarter Details
EA’s full-game revenues (24.5% of total revenues) declined 51.4% year over year to $282 million. Net bookings from full games decreased 31% year over year to $266 million.
Further segregating full-game revenues, full-game download revenues decreased 10% year over year to $163 million. Revenues from packaged goods plunged 70% year over year to $119 million.
However, live services and other revenues (75.5% of total revenues) rose 13.2% year over year to $869 million. Net bookings from live services fell 5% year over year to $644 million.
Live services performance was primarily driven by Madden Ultimate Team and FIFA Ultimate Team.
Notably, Apex Legends net bookings increased 24% year on year. The game is now expected to deliver more than $500 million in net bookings this fiscal year.
Based on platforms, revenues from console decreased 23% year over year to $714 million in the reported quarter. Net bookings from console plunged 45% year over year to $513 million.
Revenues from PC/browser were unchanged at $249 million. Net bookings from PC/browser increased 4% year over year to $225 million.
Revenues from mobile platform increased 6% year over year to $188 million. Net bookings from mobile increased 4% year over year to $172 million.
Important Game & Player Metrics
EA launched Madden NFL 21, Rocket Arena, Star Wars: Squadrons and UFC 4 in the reported quarter. Madden NFL 21 has nearly 30% more players on a year-over-year basis.
Moreover, since its launch, FIFA 20 has reached nearly 35 million players on console and PC.
Further, EA Play now has more than 6.5 million paid subscribers, reflecting the growing popularity of the platform.
Additionally, during the fiscal year, EA launched more than 125 games and content packs on the Steam platform.
Operating Details
EA’s GAAP gross profit decreased 8.3% from the year-ago quarter to $865 million. However, gross margin expanded 520 basis points (bps) on a year-over-year basis to 75.2%.
Operating expenses increased 6.1% from the year-ago quarter to $716 million. As a percentage of revenues, operating expenses increased from 50.1% in the year-ago quarter to 62.2% in the reported quarter.
As a percentage of revenues, marketing & sales (M&S) and research & development (R&D) expenses increased 790 bps and 230 bps, respectively. Moreover, general & administrative (G&A) expenses increased 210 bps in the reported quarter.
Operating income on a GAAP basis decreased 44.4% year over year to $149 million. Operating margin contracted 690 bps on a year-over-year basis to 12.9%.
Balance Sheet and Cash Flow
As of Sep 30, 2020, EA had $6.03 billion in cash and short-term investments compared with $5.96 billion as of Jun 30, 2020.
Net cash from operating activities in the reported quarter was $61 million compared with $378 billion in the previous quarter and $37 million in the year-ago quarter.
EA announced a new $2.6 billion, two-year stock repurchase program. The company also declared a quarterly cash dividend of 17 cents per share. The dividend is payable on Dec 23, 2020, to shareholders of record as of the close of business on Dec 2.
Guidance
For the third quarter of fiscal 2021, EA expects GAAP revenues of $1.675 billion. Net bookings are expected to be $2.350 billion, primarily benefiting from the launch of FIFA 21.
EA anticipates earnings to be 61 cents per share.
For fiscal 2021, EA still expects revenues of $5.625 billion and net bookings of $5.95 billion. Forex is expected to have a negative impact of $80 million.
Moreover, postponement of two EA Originals titles to fiscal 2022 from fiscal 2021 is expected to hurt current fiscal’s top-line by roughly $120 million.
Additionally, earnings are expected to be $3.15 per share, better than the previous guidance of $2.97 per share.
Operating cash flow is estimated to be $1.85 billion.
Note: The EPS data mentioned in the text of this section differs from the rest of report due to the difference in calculation or consideration of one-time items.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
VGM Scores
Currently, Electronic Arts has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Electronic Arts has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.