Activision Blizzard Earnings: Surprises Wall Street on Profit Rise

Activision Blizzard Inc (NASDAQ:ATVI) reported net income above Wall Street’s expectations for the third quarter. Activision Blizzard is an online, personal computer, console, and handheld game publisher.

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Activision Blizzard Inc Earnings Cheat Sheet

Results: Net income for Activision Blizzard Inc rose to $226 million (20 cents per share) vs. $148 million (13 cents per share) in the same quarter a year earlier. This marks a rise of 52.7% from the year-earlier quarter.

Revenue: Rose 11.5% to $841 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Activision Blizzard Inc reported adjusted net income of 15 cents per share. By that measure, the company beat the mean estimate of 7 cents per share. It beat the average revenue estimate of $551.9 million.

Quoting Management: Robert Kotick, Chief Executive Officer, Activision Blizzard, said, “Our unyielding commitment to excellence, the strength of our employees around the globe and our focus on creating great entertainment experiences have enabled us to once again deliver better-than-expected financial results. We have, for the third straight year, generated over $1 billion of operating cash flow for the trailing twelve month period ending September 30. Our performance was driven by the launch of Blizzard Entertainment’s World of Warcraft: Mists of Pandaria and continued sales of its top-selling PC game, Diablo III, as well as Activision Publishing’s new entertainment property, Skylanders Spyro’s Adventure, and sales of titles in the Call of Duty franchise. Based on our strong third-quarter performance and increased visibility into the remainder of the year, we are raising our full-year financial outlook and expect to deliver record non-GAAP operating margins and the highest non-GAAP earnings per share in our company’s history. We now expect non-GAAP earnings per share will increase more than 18% year over year.” Kotick added, “Skylanders Giants is off to a great start and next week the company will release Call of Duty: Black Ops II, which we believe will be one of the most successful launches of any form of entertainment in history.” Kotick continued, “As we look to 2013, we are cautious about business prospects given a continuingly challenged global economy, the ongoing console transition and very difficult year-over-year comparables due to Blizzard’s record-shattering Diablo III sales in 2012. We expect that over the long-term, we will maintain our leadership position as the world’s leading interactive entertainment company and continue to provide strong returns to our shareholders by delivering great games to audiences around the world.”

Key Stats:

The company has now topped analyst estimates for the last four quarters. It beat the mark by 7 cents in the second quarter, by 3 cents in the first quarter, and by 4 cents in the fourth quarter of the last fiscal year.

A year-over-year revenue increase last quarter snaps a streak of three consecutive quarters of revenue declines. Revenue fell 6.2% in the second quarter, 19.1% in the first quarter and 1.5% in the fourth quarter of the last fiscal year.

Margins were up in the second quarter, following a drop in the previous quarter. Gross margins grew to 72.5%, up four percentage points from the year-earlier quarter. In the first quarter, the figure rose 4.5 percentage points to 65.6% from the year earlier quarter.

Looking Forward: Over the past ninety days, the average estimate for the fourth quarter has fallen from 67 cents per share to 66 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. The average estimate for the fiscal year has remained at 95 cents per share.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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