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Take Two (TTWO) to Report Q4 Earnings: What’s in Store?

Zacks

Take Two Interactive Software Inc TTWO is scheduled to report fiscal fourth-quarter 2018 results on May 16.

The company beat the Zack Consensus Estimate in all the trailing four quarters, delivering an average positive surprise of 78.5%.

In the last reported quarter, the company’s earnings of $1.26 per share increased 46.5% from the year-ago quarter.

The company's net revenues came in at $480.8 million, marginally higher than $476.5 million reported in the year-ago period.

For the fiscal fourth quarter, the company expects net bookings to be in the band of $410–$460 million. The Zacks Consensus Estimate stands at $443.9 million.

Factors at Play

Take Two is likely to benefit from its popular offerings like Grand Theft Auto V, Grand Theft Auto online, NBA 2K18 and WWE 2K18. The company banks on growth in digital revenues driven by higher sales of full-game download and increase in recurrent consumer spending.

Per SuperData’s March 2018 report, NBA 2K18 and GTA V ranked among the top 10 digital game sales on console. In fact, increased sales of the digital version of the games are adding to the company’s margins.

Additionally, the acquisition of game developer, Social Point, which enabled the company to foray into free-to-play games space, has been a positive. Games like Dragon City and Monster Legends, which were also updated in the soon-to-be reported quarter are expected to drive results.

Further, Take Two remains optimistic about its new publishing label Private Division, the publisher of the popular simulation game, Kerbal Space Program, which released new contents in the fourth-quarter.

However, the growing popularity for Epic Games’ Fortnite is an overhang on Take Two. This is evident from SuperData’s February report, which states that monthly active users of Fortnite were more than that of GTA V.

Rising competition from the likes of Electronic Arts EA, Activision Blizzard ATVI and Zynga ZNGA remains a headwind. Also, increase in operating expenses due to higher acquisition costs as well as higher marketing and R&D expenses remain an overhang on the bottom line.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Take Two has a Zacks Rank #3 and its Earnings ESP is +4.33%. Therefore, the company is likely to deliver a positive surprise this quarter.

You can see the complete list of today’s Zacks #1 Rank stocks here.


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