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Why Is Electronic Arts (EA) Down 4.8% Since Last Earnings Report?
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It has been about a month since the last earnings report for Electronic Arts (EA - Free Report) . Shares have lost about 4.8% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Electronic Arts’ Q1 Earnings and Revenues Increase Y/Y
Electronic Arts reported first-quarter fiscal 2023 earnings of $1.11 per share, which surged 53.6% year over year.
Revenues exceeded the guidance of $1.675 billion to $1.725 billion and increased 13.9% year over year to $1.76 billion, driven by strength in the FIFA franchise and the F1 22 launch. FIFA Online 4 hit a new high in engagement and FIFA Mobile delivered its biggest net bookings quarter ever.
The Zacks Consensus Estimate for loss and revenues was pegged at 6 cents per share and $1.25 billion, respectively.
Net bookings exceeded the expected range of $1.20 to $1.25 billion but decreased 2.8% year over year to $1.29 billion.
Quarter Details
EA’s full-game revenues (19.3% of total revenues) increased 5.9% year over year to $341 million. Full-game download revenues increased 2% year over year to $237 million. Revenues from packaged goods rose 17% year over year to $104 million.
Live services and other revenues (80.7% of total revenues) rose 16% year over year to $1.42 billion.
Based on platforms, revenues from consoles increased 7% year over year to $1.04 billion in the reported quarter. Revenues from PC & Other increased 11% year over year to $402 million. Revenues from the mobile platform increased 48% year over year to $323 million.
Operating Details
EA’s GAAP gross profit rose 17.6% from the year-ago quarter’s levels to $1.45 billion. Gross margin expanded 250 basis points (bps) on a year-over-year basis to 82.2%.
Operating expenses increased 10.7% year over year to $1.01 billion. As a percentage of revenues, operating expenses contracted 170 basis points (bps) on a year-over-year basis to 57.3%.
Operating income on a GAAP basis increased 37% year over year to $441 million. The operating margin expanded 420 bps year over year to 25% in the reported quarter.
Balance Sheet and Cash Flow
As of Jun 30, 2022, EA had $2.41 billion in cash and short-term investments compared with $3.06 billion as of Mar 31, 2022.
Net cash used in operating activities in the reported quarter was $78 million against net cash provided by operating activities of $444 million in the previous quarter.
EA repurchased 2.5 million shares for $320 million in the reported quarter, bringing the total for the trailing twelve months to 9.7 million shares for $1.295 billion.
The company also declared a quarterly cash dividend of 19 cents per share. The dividend will be paid out on Sep 21, 2022, to shareholders of record as of the close of business on Aug 31, 2022.
Guidance
For second-quarter fiscal 2023, EA expects GAAP revenues between $1.85 billion and $1.9 billion and earnings in the range of 78-86 cents per share. Net bookings are expected to be between $1.725 and $1.775 billion.
For fiscal 2023, EA expects revenues in the range of $7.6 billion-$7.8 billion and earnings of $2.79 to $2.87 per share. The company expects net bookings for the year to be between $7.9 billion and $8.1 billion.
Operating cash flow is estimated to be in the band of $1.6 billion to $1.65 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?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -10.86% due to these changes.
VGM Scores
Currently, Electronic Arts has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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Why Is Electronic Arts (EA) Down 4.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Electronic Arts (EA - Free Report) . Shares have lost about 4.8% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Electronic Arts’ Q1 Earnings and Revenues Increase Y/Y
Electronic Arts reported first-quarter fiscal 2023 earnings of $1.11 per share, which surged 53.6% year over year.
Revenues exceeded the guidance of $1.675 billion to $1.725 billion and increased 13.9% year over year to $1.76 billion, driven by strength in the FIFA franchise and the F1 22 launch. FIFA Online 4 hit a new high in engagement and FIFA Mobile delivered its biggest net bookings quarter ever.
The Zacks Consensus Estimate for loss and revenues was pegged at 6 cents per share and $1.25 billion, respectively.
Net bookings exceeded the expected range of $1.20 to $1.25 billion but decreased 2.8% year over year to $1.29 billion.
Quarter Details
EA’s full-game revenues (19.3% of total revenues) increased 5.9% year over year to $341 million. Full-game download revenues increased 2% year over year to $237 million. Revenues from packaged goods rose 17% year over year to $104 million.
Live services and other revenues (80.7% of total revenues) rose 16% year over year to $1.42 billion.
Based on platforms, revenues from consoles increased 7% year over year to $1.04 billion in the reported quarter. Revenues from PC & Other increased 11% year over year to $402 million. Revenues from the mobile platform increased 48% year over year to $323 million.
Operating Details
EA’s GAAP gross profit rose 17.6% from the year-ago quarter’s levels to $1.45 billion. Gross margin expanded 250 basis points (bps) on a year-over-year basis to 82.2%.
Operating expenses increased 10.7% year over year to $1.01 billion. As a percentage of revenues, operating expenses contracted 170 basis points (bps) on a year-over-year basis to 57.3%.
Operating income on a GAAP basis increased 37% year over year to $441 million. The operating margin expanded 420 bps year over year to 25% in the reported quarter.
Balance Sheet and Cash Flow
As of Jun 30, 2022, EA had $2.41 billion in cash and short-term investments compared with $3.06 billion as of Mar 31, 2022.
Net cash used in operating activities in the reported quarter was $78 million against net cash provided by operating activities of $444 million in the previous quarter.
EA repurchased 2.5 million shares for $320 million in the reported quarter, bringing the total for the trailing twelve months to 9.7 million shares for $1.295 billion.
The company also declared a quarterly cash dividend of 19 cents per share. The dividend will be paid out on Sep 21, 2022, to shareholders of record as of the close of business on Aug 31, 2022.
Guidance
For second-quarter fiscal 2023, EA expects GAAP revenues between $1.85 billion and $1.9 billion and earnings in the range of 78-86 cents per share. Net bookings are expected to be between $1.725 and $1.775 billion.
For fiscal 2023, EA expects revenues in the range of $7.6 billion-$7.8 billion and earnings of $2.79 to $2.87 per share. The company expects net bookings for the year to be between $7.9 billion and $8.1 billion.
Operating cash flow is estimated to be in the band of $1.6 billion to $1.65 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?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -10.86% due to these changes.
VGM Scores
Currently, Electronic Arts has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Electronic Arts has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.