Giant Interactive Group Earnings: Here’s Why Investors are Happy

Giant Interactive Group, Inc. (NYSE:GA) delivered a profit and beat Wall Street’s expectations, AND beat the revenue expectation. The revenue beat is a positive sign to shareholders seeking high growth out of the company. Shares are up 1.76%.

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Giant Interactive Group, Inc. Earnings Cheat Sheet

Results: Net income decreased -12.32% to $49.6 million (22 cents per diluted share) in the quarter versus a net gain of $56.57 million in the year-earlier quarter.

Revenue: Rose 20.5% to $86.4 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Giant Interactive Group, Inc. reported adjusted net income of 22 cents per share. By that measure, the company beat the mean analyst estimate of $0.18. It beat the average revenue estimate of $84.47 million.

Quoting Management:

Mr. Yuzhu Shi, Giant’s Chairman and Chief Executive Officer commented, “Our solid third quarter results reflect the strength of our expanded MMO game portfolio. Overall, we are pleased to see our underlying businesses perform well, especially with respect to our diversification efforts.

While the largest portion of our revenue is still based on the ZT Online 1 Series, we are seeing promising results from our portfolio diversification strategy implemented over the past year. For example, ZT Online 2 has emerged as a key revenue growth driver. In addition, ZT Online 2’s micro-client version, which successfully launched in September 2012, is now acquiring new users every day and, as we expected, is already contributing to revenue. We have also bolstered our MMORPG pipeline with titles such as World of Xianxia. The positive feedback we received from the engineering testing of such game in September 2012 indicates its potential to be another blockbuster game, and demonstrates the Company’s superior MMORPG development capabilities to continue creating products that attract hardcore gamers. Besides MMORPGs, we have made substantial progress in games under brand new genres such as the recent release of an upgraded single-player campaign version of Glorious Mission, which has exceeded our expectations by attracting over a million downloads. We believe these strong third quarter results offer a first look at the new revenue growth profile based on which we expect our future earnings and growth.

As a pivotal business initiative, we have also made progress developing our webgame pipeline, which is part of our diversification efforts. For example, we anticipate the commercial launch of two webgames in the first quarter 2013. Even as we invest in growing our business by introducing new game types, while also exploring new markets and user bases, we continue to successfully maintain growth rates and profitability that exceed the industry average.

Finally, our Company is positioned for long-term growth as we continue to exercise our multi-year plan to broaden our user base by diversifying our game portfolio, increasing our distribution through the leveraging of our strong relationships with internet platform partners, and increasing our geographic footprint through developing and licensing innovative new games. I have never been more excited about the future of Giant and am confident that the new games in our pipeline will enable us to reach new levels of success and growth.”

Key Stats:

Revenue increased 3.93% from $83.13 million in the previous quarter. Net income increased 2.59% from $48.35 million in the previous quarter.

Looking Forward: Analysts have a neutral outlook for the company’s next-quarter performance. Over the past three months, the average estimate for next quarter’s earnings is a profit of $0.18 and has not changed. For the current year, the average estimate has moved up from a profit of $0.77 to a profit of $0.78 over the last ninety days.

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(Company fundamentals provided by Xignite Financials.)

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