Electronic Arts Inc. (EA): Why This Quarter Is Key for It

Electronic Arts Inc. (NASDAQ:EA)On Tuesday, Electronic Arts Inc. (NASDAQ:EA) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they’ll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you’ll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Electronic Arts Inc. (NASDAQ:EA) is a leader in the video-gaming industry. But that industry has been under fire lately, as the revolution in low-priced mobile gaming threatens the business model of the high-cost console-based offerings on which Electronic Arts Inc. (NASDAQ:EA) has relied and thrived for years. Let’s take an early look at what’s been happening with Electronic Arts over the past quarter and what we’re likely to see in its quarterly report.

Stats on Electronic Arts

Analyst EPS Estimate $0.58
Change From Year-Ago EPS 241%
Revenue Estimate $1.04 billion
Change From Year-Ago Revenue 6.1%
Earnings Beats in Past 4 Quarters 4

Source: Yahoo! Finance.

Will Electronic Arts keep posting high scores in its earnings this quarter?
Analysts have pulled back on their earnings estimates for Electronic Arts Inc. (NASDAQ:EA) in recent months, with consensus earnings-per-share falling by $0.07 for the just-ended quarter. That weakness is seen continuing into fiscal 2014, with a $0.04-per-share pullback in estimates, but the stock price has actually recovered nicely since late January, rising almost 20%.

The video game industry has struggled for a long time now, as console makers have been slow to produce new innovations and game producers have increasingly relied on sequels in established blockbuster series to produce sales. Yet even in a horrible environment, EA and its fellow game-makers have seen their stocks soar lately in anticipation of future releases of new game consoles.

Still, Electronic Arts Inc. (NASDAQ:EA) has had a particularly tough time even compared to its peers. The company was named Consumerist’s Worst Company in America last month, as survey respondents cited failings in customer support and game quality as key contributors to the bad rating. By contrast, Activision Blizzard, Inc. (NASDAQ:ATVI)‘s model of combining high-sales console blockbusters with the recurring revenue from its World of Warcraft franchise has produced an ongoing stream of high-quality games that have the potential to become the next blockbuster franchises of the future.