Earnings Cheat Sheet: Should Investors Play EA?

Electronic Arts (ERTS) is a California based video game publisher.  The company is known for hits such as Medal of Honor, Madden, Rock Band, and FIFA.  The video game industry has been in decline as more people turn to social media and smart phones for gaming experiences.  EA has been cutting costs and games in order to improve company financials.  Recently, EA decided to cancel its new NBA Elite 11 game as an effort to help reorganize the company. Tuesday, after the closing bell, EA released its most recent earnings report.

Earnings: Excluding one time items, EA reported earnings of 10 cents per share.  This was an increase from 6 cents per share in the same year ago quarter.  EA expects earnings per share for the next quarter to be 50 cents to 60 cents per share.

Revenue: EA reported $884 million for the quarter. This was a decrease of the $1.2 billion in revenue earned in last year’s quarter.  Next quarter, EA expects revenue to be about $1.375 billion to $1.5 billion.  EA hopes to increase revenue in the social gaming sector by expanding its two social gaming companies Chillingo and Playfish.

Actual versus Wall Street Expectations: The company’s profit of 10 cents per share beat estimates of a 10 cent loss per share. EA also beat revenue estimates of $815 million per share.  Although EA beat estimates, shares trade down about 2% in after hour trading.

Notable Stats: EA is making an impact on other gaming devices besides traditional consoles.  EA was the #1 publisher on all platforms on the Apple App Store for the quarter.

Did You Hear That? John Schappert, Chief Operating Officer said, ” We’re seeing nice growth in social gaming, and will see that continue as Facebook continues to add new users and it becomes easier to purchase content on that site.”

Commentary: Electronic Arts is a company that appears to have missed the recovery this year.  Its share price is down almost 9% YTD.  While EA is positioning itself for future growth, it is too early to tell if these moves will pay off for the company and investors.  Furthermore, there has been little excitement in the console sector.  It has been 5 years since the Xbox 360 was released, and 4 years since the Wii and PS3.

Disclosure: No Positions.