Here’s What You Need to Know Before Take-Two Earnings

Take-Two (NASDAQ:TTWO) will report its fiscal fourth quarter of 2012 (March) results after the market close today and host a conference call at 4:30pm EST.

A Closer Look: Take-Two Earnings Sneak Peek>>

We expect Q4 results in-line with our lowered estimates. Lowering our revenue estimate to $150 million from $162 million, versus consensus of $141 million, and guidance of $112 – 162 million. Lowering our EPS estimate to $(0.55) from $(0.47), versus consensus of $(0.54) and guidance of $(0.65) – (0.50). Our revised estimates reflect sluggish industry sales and a weak debut for The Darkness II.

Last week, Take-Two announced BioShock Infinite had been delayed to Q4:13 from Q3:13. In response to the delay, we are lowering our FY:13 estimates for revenue to $1.90 billion from $1.95 billion, and for EPS to $3.00 from $3.20 due to a smaller window for reorders. In our view, the delay opened the window for Grand Theft Auto V to be released in Q3:13. We believe October is the preferred release month for Rockstar Games as it has scheduled every prior GTA release during that month (with GTA IV later delayed).

Management will either reaffirm FY:13 guidance (implying that GTA is on track for release) or will lower guidance. We note that management did not update FY:13 guidance when it announced the BioShock Infinite delay. The company has a history of providing conservative guidance, and we are skeptical that it would achieve FY:13 earnings guidance of over $2.00 without a GTA game. Therefore, a downward revision to EPS guidance would indicate that GTA will not launch this year.

We expect an update on GTA V release timing as early as next week, or by E3, scheduled for June 5-7 in Los Angeles. If there is no update on either date, we believe it is unlikely that GTA V will launch this calendar year.

Maintaining our OUTPERFORM rating and our 12-month price target of $19, which reflects a forward multiple of 15x estimated sustainable EPS of $1.20 (fully-taxed) plus an estimated $1/share in net cash. Our multiple is in-line with the historical range, and reflects improving execution.

Michael Pachter is an analyst at Wedbush Morgan.

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