Take-Two Interactive Software Earnings Preview

Take-Two Interactive Software (NASDAQ:TTWO) will report fiscal Q1 2012 (ended June) results after market close on Monday, August 8, and host a conference call at 1:30pm PT (877-407-0984 or at http://ir.take2games.com). Take-Two recently changed FYE from October toMarch, so this will be the first time it reports June results using new fiscal quarters.

We expect Q1 results in-line with our recently revised estimates for revenue of $350 million and pro forma EPS of $0.10, compared with consensus for revenue of $362 million and EPS of $0.10, and guidance for revenue of $325 –375 million, and EPS of $0.00 – 0.10. According to NPD, Take-Two’s (NASDAQ:TTWO) U.S. retail sales for the June quarter were down ≈ 18% y-o-y due to the strength of Red Dead Redemption last year. On July 5, we lowered our estimates to reflect lower-thanexpected sales of Duke Nukem Forever resulting from poor reviews.

Lowering our FY:12 estimates slightly to reflect a lighter release slate. We lowered our FY:12 estimates for revenue to $1.16 billion from $1.18 billion and for EPS to $0.78 from $0.86. We expect the delay of The Darkness II to Q4 from Q3 of FY:12 (announced today after the close) to have a minimal impact on 2H results.

Take-Two’s (NASDAQ:TTWO) share price has stalled due to numerous game delays and disappointing reviews of Duke Nukem Forever, but we expect Take-Two’s commitment to high quality games to translate into consistent profits and share price appreciation. Of the major publishers, Take-Two has had the fewest “misses” in terms of game quality over the last two years, and as a result, delivered a profitable FY:11 without a Grand Theft Auto release.

We continue to expect the release of Grand Theft Auto V in FY:13. We view the extension of Rockstar employment contracts and FY:13 guidance for EPS of over $2.00 as indicators of a GTA release in FY:13, likely holiday 2012.

Michael Pachter is a video game analyst at Wedbush Morgan.