Video Game Makers Expected to Post Losses

In the wake of last week's disappointing earnings and slashed guidance from Zynga (NASDAQ: ZNGA) and wider-than expected net loss from Nintendo, other video game makers are scheduled to share their most recent quarterly results this week. Analysts on average expect to see net losses and declining sales from Electronic Arts (NASDAQ: EA), Take-Two Interactive (NASDAQ: TTWO) and THQ (NASDAQ: THQI). Stronger sales for Activision Blizzard (NASDAQ: ATVI) are expected to have buoyed its earnings per share (EPS).

Analysts believe that Activision Blizzard, the company behind Call of Duty and World of Warcraft, will post an EPS of $0.12 on revenue of $831.8 million. That would be up from $0.10 and $699.0 million in the second-quarter of last year. Analysts have underestimated Activision Blizzard's per-share earnings in each of the past ten quarters. The company reports on Thursday.

Electronic Arts, the maker of Madden NFL and The Sims, is expected to say Tuesday that its net loss for the fiscal first quarter widened from $0.37 per share a year ago to $0.42. But Electronic Arts' earnings results have been better than expected in the past six quarters. Revenue is projected to have fallen 4.3 percent year over year to $501.4 million.

The Grand Theft Auto series comes from Take-Two Interactive, which is expected to post fiscal first-quarter net loss of $0.65 per share on Tuesday, compared to a profit of $0.02 per share for the year-ago period. However, that estimate is down from a loss of $0.85, the consensus 60 days ago. Revenue now is expected to have fallen more than 24 percent to $253.9 million.

The forecast for THQ, which offers WWE-affiliated games, calls for a net loss of $3.95 per share. That compares to a per-share loss of $9.40 in the fiscal first quarter of last year. Revenue is anticipated to have slumped more than 79 percent from the year-ago period to $29.3 million. THQ managed to beat low expectations for revenue in the fourth quarter. The company reports on August 6.

Activision Blizzard has a long-term EPS growth forecast of about 11 percent, while those of the other three companies on this list are 14 percent or greater. But shares of those three are trading near 52-week lows, and the return on equity for Take-Two Interactive and THQ are in negative territory. Short interest in Take-Two Interactive and THQ are at least 14 percent of the float. Activision Blizzard is the only one of these four that offers a dividend; the yield is about 1.5 percent.

Analysts on average recommend buying shares of Activision Blizzard and Take-Two Interactive. For the moment, the consensus price target for Activision Blizzard is about 23 percent above the current share price. Those for the other three game producers are at least 40 percent higher than the current share prices, which are all at least 30 percent lower year to date. All four have underperformed the broader markets over the past six months.

See also: Disney Dumps THQ, Teams with Activision for Wreck-It Ralph Game and Is Zynga Going to Go Belly Up?