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Electronic Arts (EA) Down 5.8% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Electronic Arts (EA - Free Report) . Shares have lost about 5.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Electronic Arts due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Electronic Arts’ Q3 Earnings and Revenues Increase Y/Y
Electronic Arts reported third-quarter fiscal 2022 earnings of 23 cents per share, up 68% year over year.
Revenues increased 6.9% year over year to $1.79 billion, driven by strong performances by FIFA, Apex Legends, EA SPORTS global football franchise and Star Wars: Galaxy of Heroes.
The Zacks Consensus Estimate for earnings and revenues was pegged at $3.22 per share and $2.66 billion, respectively.
Net bookings increased 7.4% year over year to $2.58 billion, down from management’s guidance of $2.625 billion.
Quarter Details
EA’s full-game revenues (34.4% of total revenues) declined 14.7% year over year to $616 million. Full-game download revenues increased 15% year over year to $400 million. Revenues from packaged goods surged 42% year over year to $216 million.
Live services and other revenues (65.6% of total revenues) rose 23.3% year over year to $1.17 billion.
Based on platforms, revenues from consoles increased 4% year over year to $1.14 billion in the reported quarter. Revenues from PC & Other increased 15% year over year to $374 million. Revenues from the mobile platform increased 78% year over year to $277 million.
Apex Legends monthly active players were up 30% year over year.
Players spent approximately 20% more time on EA games in fiscal 2022 compared with the previous year’s levels.
Operating Details
EA’s GAAP gross profit rose 8% from the year-ago quarter’s levels to $1.16 billion. Gross margin expanded 70 basis points (bps) on a year-over-year basis to 64.7%.
Operating expenses increased 28.6% year over year to $1.06 billion. As a percentage of revenues, operating expenses increased from 49.1% in the year-ago quarter to 59% in the reported quarter.
Operating income on a GAAP basis declined 59.4% year over year to $102 million. Operating margin contracted 930 bps year over year to 5.7% in the reported quarter.
Balance Sheet and Cash Flow
As of Dec 31, 2021, EA had $3.02 billion in cash and short-term investments compared with $1.97 billion as of Sep 30, 2021.
Net cash provided by operating activities in the reported quarter was $1.53 billion against net cash provided in operating activities of $64 million in the previous quarter.
EA repurchased 2.4 million shares for $325 million in the reported quarter.
The company also declared a quarterly cash dividend of 17 cents per share. The dividend will be paid out on Mar 23, 2022, to shareholders of record as of the close of business on Mar 9, 2022.
Guidance
For fourth-quarter fiscal 2022, EA expects GAAP revenues of $1.759 billion and earnings of 46 cents per share. Net bookings are expected at $1.761 billion.
For fiscal 2022, EA expects revenues of $6.925 billion and earnings of $2.43 per share. The company reduced net bookings expectations for the year to $7.525 billion.
Operating cash flow is estimated to be $1.90 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
At this time, Electronic Arts has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been 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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Electronic Arts (EA) Down 5.8% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Electronic Arts (EA - Free Report) . Shares have lost about 5.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Electronic Arts due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Electronic Arts’ Q3 Earnings and Revenues Increase Y/Y
Electronic Arts reported third-quarter fiscal 2022 earnings of 23 cents per share, up 68% year over year.
Revenues increased 6.9% year over year to $1.79 billion, driven by strong performances by FIFA, Apex Legends, EA SPORTS global football franchise and Star Wars: Galaxy of Heroes.
The Zacks Consensus Estimate for earnings and revenues was pegged at $3.22 per share and $2.66 billion, respectively.
Net bookings increased 7.4% year over year to $2.58 billion, down from management’s guidance of $2.625 billion.
Quarter Details
EA’s full-game revenues (34.4% of total revenues) declined 14.7% year over year to $616 million. Full-game download revenues increased 15% year over year to $400 million. Revenues from packaged goods surged 42% year over year to $216 million.
Live services and other revenues (65.6% of total revenues) rose 23.3% year over year to $1.17 billion.
Based on platforms, revenues from consoles increased 4% year over year to $1.14 billion in the reported quarter. Revenues from PC & Other increased 15% year over year to $374 million. Revenues from the mobile platform increased 78% year over year to $277 million.
Apex Legends monthly active players were up 30% year over year.
Players spent approximately 20% more time on EA games in fiscal 2022 compared with the previous year’s levels.
Operating Details
EA’s GAAP gross profit rose 8% from the year-ago quarter’s levels to $1.16 billion. Gross margin expanded 70 basis points (bps) on a year-over-year basis to 64.7%.
Operating expenses increased 28.6% year over year to $1.06 billion. As a percentage of revenues, operating expenses increased from 49.1% in the year-ago quarter to 59% in the reported quarter.
Operating income on a GAAP basis declined 59.4% year over year to $102 million. Operating margin contracted 930 bps year over year to 5.7% in the reported quarter.
Balance Sheet and Cash Flow
As of Dec 31, 2021, EA had $3.02 billion in cash and short-term investments compared with $1.97 billion as of Sep 30, 2021.
Net cash provided by operating activities in the reported quarter was $1.53 billion against net cash provided in operating activities of $64 million in the previous quarter.
EA repurchased 2.4 million shares for $325 million in the reported quarter.
The company also declared a quarterly cash dividend of 17 cents per share. The dividend will be paid out on Mar 23, 2022, to shareholders of record as of the close of business on Mar 9, 2022.
Guidance
For fourth-quarter fiscal 2022, EA expects GAAP revenues of $1.759 billion and earnings of 46 cents per share. Net bookings are expected at $1.761 billion.
For fiscal 2022, EA expects revenues of $6.925 billion and earnings of $2.43 per share. The company reduced net bookings expectations for the year to $7.525 billion.
Operating cash flow is estimated to be $1.90 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
At this time, Electronic Arts has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been 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.